10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________

FORM 10-Q

_______________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 29, 2022

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission File Number: 1-37499

_______________________________________________

BARNES & NOBLE EDUCATION, INC.

(Exact Name of Registrant as Specified in Its Charter)

_______________________________________________

Delaware			46-0599018
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)
120 Mountain View Blvd.,	Basking Ridge,	NJ	07920
(Address of Principal Executive Offices)			(Zip Code)

(Registrant’s Telephone Number, Including Area Code): (908) 991-2665

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Trading Symbol	Name of Exchange on which registered
Common Stock, $0.01 par value per share	BNED	New York Stock Exchange

_______________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging Growth Company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 25, 2022, 52,598,798 shares of Common Stock, par value $0.01 per share, were outstanding.

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Fiscal Quarter Ended October 29, 2022

Index to Form 10-Q

			Page No.
PART I -	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations – For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021		3
	Condensed Consolidated Balance Sheets – As of October 29, 2022, October 30, 2021, and April 30, 2022		4
	Condensed Consolidated Statements of Cash Flows – For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021		5
	Condensed Consolidated Statements of Equity – As of October 29, 2022 and October 30, 2021		6
	Notes to Condensed Consolidated Financial Statements		7
	Note 1.	Organization	7
	Note 2.	Summary of Significant Accounting Policies	8
	Note 3.	Revenue	12
	Note 4.	Segment Reporting	13
	Note 5.	Equity and Earnings Per Share	16
	Note 6.	Fair Value Measurements	17
	Note 7.	Debt	18
	Note 8.	Leases	19
	Note 9.	Supplementary Information	20
	Note 10.	Long-Term Incentive Plan Compensation Expense	21
	Note 11.	Employee Benefit Plans	22
	Note 12.	Income Taxes	22
	Note 13.	Legal Proceedings	22
	Note 14.	Subsequent Event	23
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
	Overview		24
	Results of Operations		28
	Non-GAAP Measures		38
	Liquidity and Capital Resources		41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		45
Item 4.	Controls and Procedures		46
PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings		47
Item 1A.	Risk Factors		47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		47
Item 5.	Other Information		47
Item 6.	Exhibits		47
	SIGNATURES		49

2

PART I - FINANCIAL INFORMATION

Item 1:    Financial Statements

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited) 

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Sales:
Product sales and other	$	575,764	$	577,329	$	828,710	$	805,099
Rental income	41,334		49,648		52,246		62,672
Total sales	617,098		626,977		880,956		867,771
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	449,322		453,070		643,427		627,231
Rental cost of sales	22,941		28,348		29,206		34,952
Total cost of sales	472,263		481,418		672,633		662,183
Gross profit	144,835		145,559		208,323		205,588
Selling and administrative expenses	107,086		107,902		205,572		194,137
Depreciation and amortization expense	10,759		11,952		23,292		24,576
Restructuring and other charges	260		1,116		635		3,021
Operating income (loss)	26,730		24,589		(21,176)		(16,146)
Interest expense, net	4,886		2,264		8,754		4,758
Income (loss) before income taxes	21,844		22,325		(29,930)		(20,904)
Income tax (benefit) expense	(300)		(203)		633		196
Net income (loss)	$	22,144	$	22,528	$	(30,563)	$	(21,100)
Income (Loss) per share of common stock:
Basic	$	0.42	$	0.43	$	(0.58)	$	(0.41)
Diluted	$	0.42	$	0.41	$	(0.58)	$	(0.41)
Weighted average shares of common stock outstanding:
Basic	52,438		51,666		52,305		51,570
Diluted	53,195		54,568		52,305		51,570

See accompanying notes to condensed consolidated financial statements.

3

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data) 

	October 29, 2022		October 30, 2021		April 30, 2022
	(unaudited)		(unaudited)		(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	19,129	$	10,996	$	10,388
Receivables, net	210,009		218,053		137,039
Merchandise inventories, net	371,570		370,529		293,854
Textbook rental inventories	49,355		50,642		29,612
Prepaid expenses and other current assets	54,924		68,965		61,709
Total current assets	704,987		719,185		532,602
Property and equipment, net	96,096		91,875		94,072
Operating lease right-of-use assets	291,704		252,650		286,584
Intangible assets, net	121,487		141,847		129,624
Goodwill	4,700		4,700		4,700
Deferred tax assets, net	—		15,943		—
Other noncurrent assets	20,980		26,010		23,971
Total assets	$	1,239,954	$	1,252,210	$	1,071,553
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	326,168	$	333,099	$	182,790
Accrued liabilities	118,689		122,734		95,387
Current operating lease liabilities	130,802		118,434		97,143
Short-term borrowings	—		—		40,000
Total current liabilities	575,659		574,267		415,320
Long-term deferred taxes, net	1,430		—		1,430
Long-term operating lease liabilities	190,758		171,341		219,594
Other long-term liabilities	19,643		51,113		21,135
Long-term borrowings	252,000		183,300		185,700
Total liabilities	1,039,490		980,021		843,179
Commitments and contingencies	—		—		—
Stockholders' equity:
Preferred stock, $0.01 par value; authorized, 5,000 shares; 0 shares issued and 0 shares outstanding	—		—		—
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 55,132, 54,162 and 54,234 shares, respectively; outstanding, 52,599, 51,976 and 52,046 shares, respectively	551		541		542
Additional paid-in capital	744,339		736,886		740,838
Accumulated deficit	(522,057)		(443,737)		(491,494)
Treasury stock, at cost	(22,369)		(21,501)		(21,512)
Total stockholders' equity	200,464		272,189		228,374
Total liabilities and stockholders' equity	$	1,239,954	$	1,252,210	$	1,071,553

See accompanying notes to condensed consolidated financial statements.

4

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

	26 weeks ended
	October 29, 2022		October 30, 2021
Cash flows from operating activities:
Net loss	$	(30,563)	$	(21,100)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization expense	23,292		24,576
Content amortization expense	3,195		2,586
Amortization of deferred financing costs	1,200		725
Merchandise inventory loss	—		434
Stock-based compensation expense	3,510		2,600
Changes in other long-term assets and liabilities, net	319		1,596
Changes in operating lease right-of-use assets and liabilities	(298)		286
Changes in other operating assets and liabilities, net	8,721		12,573
Net cash flows provided by operating activities	9,376		24,276
Cash flows from investing activities:
Purchases of property and equipment	(20,573)		(21,264)
Net change in other noncurrent assets	255		326
Net cash flows used in investing activities	(20,318)		(20,938)
Cash flows from financing activities:
Proceeds from borrowings	348,200		259,720
Repayments of borrowings	(321,900)		(254,020)
Payment of deferred financing costs	(1,716)		—
Purchase of treasury shares	(857)		(2,359)
Proceeds from the exercise of stock options, net	—		37
Net cash flows provided by financing activities	23,727		3,378
Net increase in cash, cash equivalents and restricted cash	12,785		6,716
Cash, cash equivalents and restricted cash at beginning of period	21,934		16,814
Cash, cash equivalents and restricted cash at end of period	$	34,719	$	23,530
Changes in other operating assets and liabilities, net:
Receivables, net	$	(72,970)	$	(96,981)
Merchandise inventories	(77,716)		(89,851)
Textbook rental inventories	(19,743)		(21,950)
Prepaid expenses and other current assets	12,538		(3,288)
Accounts payable and accrued liabilities	166,612		224,643
Changes in other operating assets and liabilities, net	$	8,721	$	12,573

See accompanying notes to condensed consolidated financial statements.

5

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(In thousands) (unaudited)

				Additional
	Common Stock			Paid-In		Accumulated		Treasury Stock			Total
	Shares	Amount		Capital		Deficit		Shares	Amount		Equity
Balance at May 1, 2021	53,327	$	533	$	734,257	$	(422,637)	1,948	$	(19,142)	$	293,011
Stock-based compensation expense				1,122							1,122
Vested equity awards	338	3		(3)							—
Shares repurchased for tax withholdings for vested stock awards								130	(1,215)		(1,215)
Net loss						(43,628)					(43,628)
Balance July 31, 2021	53,665	$	536	$	735,376	$	(466,265)	2,078	$	(20,357)	$	249,290
Stock-based compensation expense				1,478							1,478
Vested equity awards	487	5		(5)							—
Shares repurchased for tax withholdings for vested stock awards								108	(1,144)		(1,144)
Issuance of common stock upon exercise of stock options	10	—		37							37
Net income						22,528					22,528
Balance October 30, 2021	54,162	$	541	$	736,886	$	(443,737)	2,186	$	(21,501)	$	272,189
				Additional
	Common Stock			Paid-In		Accumulated		Treasury Stock			Total
	Shares	Amount		Capital		Deficit		Shares	Amount		Equity
Balance at April 30, 2022	54,234	$	542	$	740,838	$	(491,494)	2,188	$	(21,512)	$	228,374
Stock-based compensation expense				1,791							1,791
Vested equity awards	540	5		(5)							—
Shares repurchased for tax withholdings for vested stock awards								238	(612)		(612)
Net loss						(52,707)					(52,707)
Balance July 30, 2022	54,774	$	547	$	742,624	$	(544,201)	2,426	$	(22,124)	$	176,846
Stock-based compensation expense				1,719							1,719
Vested equity awards	357	4		(4)							—
Shares repurchased for tax withholdings for vested stock awards								107	(245)		(245)
Net income						22,144					22,144
Balance October 29, 2022	55,131	$	551	$	744,339	$	(522,057)	2,533	$	(22,369)	$	200,464

See accompanying notes to condensed consolidated financial statements.

6

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Unless the context otherwise indicates, references in these Notes to the accompanying condensed consolidated financial statements to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education or "BNED", Inc., a Delaware corporation. References to “Barnes & Noble College” refer to our college bookstore business operated through our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our virtual bookstore and wholesale textbook distribution business operated through our subsidiary MBS Textbook Exchange, LLC.

This Form 10-Q should be read in conjunction with our Audited Consolidated Financial Statements and accompanying Notes to consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022, which includes consolidated financial statements for the Company as of April 30, 2022 and May 1, 2021 and for each of the three fiscal years ended April 30, 2022, May 1, 2021 and May 2, 2020 (Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively) and the unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended July 30, 2022.

Note 1. Organization

Description of Business

Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions. We operate 1,399 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment. Additionally, we offer direct-to-student products and services to help students study more effectively and improve academic performance.

The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands. We expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such capabilities through our merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. (“FLC”) (collectively referred to herein as the “FLC Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect gross general merchandise sales to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the FLC Partnership. Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo and emblematic general merchandise business.

The Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States. Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.

We have three reportable segments: Retail, Wholesale and DSS. For additional information related to our strategies, operations and segments, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

First Day Inclusive and Equitable Access Programs

We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. We offer our BNC First Day® inclusive and equitable access programs, consisting of First Day Complete and First Day, in which course materials, including both physical and digital content, are offered at a reduced price through a course fee or included in tuition, and delivered to students on or before the first day of class.

•First Day Complete is adopted by an institution and includes all classes, providing students both physical and digital materials. The First Day Complete model drives substantially greater unit sales and sell-through for the bookstore.

7

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

•Through First Day, digital course materials are adopted by a faculty member for a single course, and students receive their materials through their school's learning management system.

Offering courseware sales through our inclusive and equitable access First Day Complete and First Day models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. We expect these programs to allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has occurred at those schools where such programs have been adopted. We are moving quickly and decisively to accelerate our First Day Complete strategy. We plan to move many institutions to First Day Complete for the Fall of 2023 and the majority of schools by Fall 2024.

Approximately 111 campus stores adopted our First Day Complete course materials delivery program for the 2022 Fall Term, representing approximately 545,000 (as reported by National Center for Education Statistics) in total undergraduate student enrollment, a growth rate of 85% over Fall 2021. During the 13 weeks ended October 29, 2022, First Day Complete sales increased by $44,301 to $89,892, or 97%, as compared to $45,591 in the prior year period. During the 26 weeks ended October 29, 2022, First Day Complete sales increased by $54,732 to $106,314, or 106%, as compared to $51,582 in the prior year period.

Partnership with Fanatics and FLC

In December 2020, we entered into the FLC Partnership. Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our general merchandise business. Fanatics’ cutting-edge e-commerce and technology expertise offers our campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with Lids (FLC's parent company), the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.

We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores. We also work closely with our campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites. FLC manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores, and FLC owns the inventory it manages, relieving us of the obligation to finance inventory purchases from working capital.

COVID-19 Business Impact

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities. Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years. We cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations. Although most four year schools returned to a traditional on-campus environment, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Our condensed consolidated financial statements reflect our condensed consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported. These condensed consolidated financial statements are condensed and therefore do not include all of the information and footnotes required by GAAP. All material intercompany accounts and transactions have been eliminated in consolidation.

8

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. For certain of our retail operations, sales are generally highest in the second and third fiscal quarters, when students purchase and rent textbooks and other course materials for the typical academic year, and lowest in the first and fourth fiscal quarters. Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as MBS sells textbooks and other course materials for retail distribution. Our DSS segment sales and operating profit are realized relatively consistently throughout the year.

Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. Due to the seasonal nature of the business, the results of operations for the 13 and 26 weeks ended October 29, 2022 are not indicative of the results expected for the 52 weeks ending April 29, 2023 (Fiscal 2023).

Use of Estimates

In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Restricted Cash

As of October 29, 2022 and October 30, 2021, we had restricted cash of $15,590 and $12,534, respectively, comprised of $14,686 and $11,637, respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement, and $904 and $897, respectively, in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Merchandise Inventories

Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory, which includes certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand.

Cost is determined primarily by the retail inventory method for our Retail segment and last-in first out, or “LIFO”, method for our Wholesale segment. Our textbook inventories, for Retail and Wholesale, and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories.

For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends.

The Retail Segment courseware fulfillment order is directed first to our wholesale business before other sources of inventory are utilized. The products that we sell originate from a wide variety of domestic and international vendors. After internal sourcing, the bookstore purchases courseware from outside suppliers and publishers.

As contemplated by the FLC Partnership merchandising agreement, we sold our logo and emblematic general merchandise inventory to FLC and received proceeds of $41,773, and recognized a merchandise inventory loss on the sale of $10,262 in cost of goods sold in the condensed consolidated statement of operations during the 52 weeks ended May 1, 2021 for the Retail Segment. The final inventory sale price was determined during the first quarter of Fiscal 2022, at which time, we received additional proceeds of $1,906, and recognized a merchandise inventory loss on the sale of $434 in cost of goods sold in the condensed consolidated statement of operations for the Retail Segment.

Textbook Rental Inventories

Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Leases

We recognize lease assets and lease liabilities on the condensed consolidated balance sheet for all operating lease arrangements based on the present value of future lease payments as required by Accounting Standards Codification ("ASC") Topic 842, Leases. We do not recognize lease assets or lease liabilities for short-term leases (i.e., those with a term of twelve months or less). We recognize lease expense on a straight-line basis over the lease term for contracts with fixed lease payments, including those with fixed annual minimums, or over a rolling twelve-month period for leases where the annual guarantee resets at the start of each contract year, in order to best reflect the pattern of usage of the underlying leased asset. For additional information, see Note 8. Leases.

Revenue Recognition and Deferred Revenue

Product sales and rentals

The majority of our revenue is derived from the sale of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Note 3. Revenue.

Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

Revenue from the rental of physical textbooks, which contains a single performance obligation, is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer. Rental periods are typically for a single semester and are always less than one year in duration. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale.

Revenue from the rental of digital textbooks, which contains a single performance obligation, is recognized at the point of sale. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content. While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete.

We estimate returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.

For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis. Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition.

We do not have gift card or customer loyalty programs. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Service and other revenue

Service and other revenue is primarily derived from DSS segment subscription-based service revenues and partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers.

Subscription-based revenue, which contains a single performance obligation, is deferred and recognized based on the passage of time over the subscription period commencing at the point of sale, when control of the service transfers to the customer. The majority of subscriptions sold are one month in duration.

Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers. For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.

Cost of Sales

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Selling and Administrative Expenses

Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our DSS segment subscription-based services business. Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services.

Evaluation of Goodwill and Other Long-Lived Assets

As of October 29, 2022, we had $4,700 of goodwill on our condensed consolidated balance sheet related to our DSS reporting unit. In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. As of October 29, 2022, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $96,096, $291,704, $121,487, and $20,980, respectively, on our condensed consolidated balance sheet.

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities. Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years. In Fiscal 2022, we continued to experience the ongoing effects of COVID-19 with the surge of the Omicron variant further impacting students return to campus and on-campus activities. While the majority of schools brought students back to campus, some schools chose to conduct classes virtually.

Income Taxes

The provision for income taxes includes federal, state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax basis of assets and liabilities. The deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. We regularly review deferred tax assets for recoverability and establish a valuation allowance, if determined to be necessary.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Note 3. Revenue

Revenue from sales of our products and services is recognized either at the point in time when control of the products is transferred to our customers or over time as services are provided in an amount that reflects the consideration we expect to be entitled to in exchange for the products or services. See Note 2. Summary of Significant Accounting Policies for additional information related to our revenue recognition policies and Note 4. Segment Reporting for a description of each segment's product and service offerings.

Disaggregation of Revenue

The following table disaggregates the revenue associated with our major product and service offerings:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Retail
Course Materials Product Sales	$	419,879	$	433,734	$	547,476	$	555,954
General Merchandise Product Sales (a)	122,648		106,200		211,472		171,623
Service and Other Revenue (b)	14,749		19,370		23,923		29,172
Retail Product and Other Sales sub-total	557,276		559,304		782,871		756,749
Course Materials Rental Income	41,334		49,648		52,246		62,672
Retail Total Sales	$	598,610	$	608,952	$	835,117	$	819,421
Wholesale Sales	$	21,120	$	21,669	$	58,203	$	66,153
DSS Sales (c)	$	8,465	$	8,279	$	17,649	$	16,582
Eliminations (d)	$	(11,097)	$	(11,923)	$	(30,013)	$	(34,385)
Total Sales	$	617,098	$	626,977	$	880,956	$	867,771

(a)Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition.

(b)Service and other revenue primarily relates to brand partnerships and other service revenues.

(c)DSS sales primarily relate to direct-to-student subscription-based revenue.

(d)The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

Contract Liabilities

Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability (deferred revenue). Deferred revenue consists of the following:

•advanced payments from customers related to textbook rental and subscription-based performance obligations, which are recognized ratably over the terms of the related rental or subscription periods;

•unsatisfied performance obligations associated with partnership marketing services, which are recognized when the contracted services are provided to our partnership marketing customers; and

•unsatisfied performance obligations associated with the premium paid for the sale of treasury shares, which are expected to be recognized over the term of the e-commerce and merchandising contracts for Fanatics and FLC, respectively.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

The following table presents changes in deferred revenue associated with our contract liabilities:

	26 weeks ended
	October 29, 2022		October 30, 2021
Deferred revenue at the beginning of period	$	19,722	$	18,139
Additions to deferred revenue during the period	114,975		82,515
Reductions to deferred revenue for revenue recognized during the period	(83,651)		(66,364)
Deferred revenue balance at the end of period:	$	51,046	$	34,290
Balance Sheet classification:
Accrued liabilities	$	46,610	$	29,820
Other long-term liabilities	4,436		4,470
Deferred revenue balance at the end of period:	$	51,046	$	34,290

As of October 29, 2022, we expect to recognize $46,610 of the deferred revenue balance within the next 12 months.

Note 4. Segment Reporting

We have three reportable segments: Retail, Wholesale and DSS. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as “Corporate Services”.

We identify our segments in accordance with the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance. The following summarizes the three segments. For additional information about each segment's operations, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Retail

The Retail Segment operates 1,399 college, university, and K-12 school bookstores, comprised of 793 physical bookstores and 606 virtual bookstores. Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce websites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts. The Retail Segment also offers inclusive and equitable access programs, in which course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

Wholesale

The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,100 physical bookstores (including our Retail Segment's 793 physical bookstores) and sources and distributes new and used textbooks to our 606 virtual bookstores. Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 350 college bookstores.

DSS

The Digital Student Solutions (“DSS”) Segment includes products and services to assist students to study more effectively and improve academic performance. The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby®, an institutional and direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, writing and tutoring.

Corporate Services represents unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Intercompany Eliminations

The eliminations are primarily related to the following intercompany activities:

•The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale, and

•These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

Our international operations are not material, and the majority of the revenue and total assets are within the United States.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Summarized financial information for our reportable segments is reported below:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Sales:
Retail	$	598,610	$	608,952	$	835,117	$	819,421
Wholesale	21,120		21,669		58,203		66,153
DSS	8,465		8,279		17,649		16,582
Elimination	(11,097)		(11,923)		(30,013)		(34,385)
Total Sales	$	617,098	$	626,977	$	880,956	$	867,771
Gross Profit
Retail (a)	$	129,502	$	128,825	$	183,495	$	176,968
Wholesale	5,455		5,620		12,354		16,025
DSS	6,694		6,906		14,177		13,936
Elimination	3,184		4,208		(1,703)		(1,341)
Total Gross Profit	$	144,835	$	145,559	$	208,323	$	205,588
Selling and Administrative Expenses
Retail	$	90,086	$	89,486	$	169,090	$	157,851
Wholesale	3,867		4,387		7,998		8,378
DSS	8,132		7,305		16,277		13,752
Corporate Services	5,075		6,809		12,289		14,253
Elimination	(74)		(85)		(82)		(97)
Total Selling and Administrative Expenses	$	107,086	$	107,902	$	205,572	$	194,137
Depreciation and Amortization
Retail	$	8,869	$	8,669	$	18,398	$	18,076
Wholesale	1,370		1,364		2,719		2,664
DSS	503		1,902		2,140		3,801
Corporate Services	17		17		35		35
Total Depreciation and Amortization	$	10,759	$	11,952	$	23,292	$	24,576
Operating Income (Loss)
Retail	$	30,547	$	29,595	$	(3,993)	$	(1,042)
Wholesale	218		(131)		1,637		4,983
DSS	(1,941)		(2,301)		(4,240)		(3,617)
Corporate Services	(5,352)		(6,867)		(12,959)		(15,226)
Elimination	3,258		4,293		(1,621)		(1,244)
Total Operating Income (Loss)	$	26,730	$	24,589	$	(21,176)	$	(16,146)

	13 weeks ended				26 weeks ended
Reconciliation of segment Operating Income (Loss) to consolidated Income (Loss) Before Income Taxes:	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Total Operating Income (Loss)	$	26,730	$	24,589	$	(21,176)	$	(16,146)
Interest Expense, net	4,886		2,264		8,754		4,758
Income (Loss) Before Income Taxes	$	21,844	$	22,325	$	(29,930)	$	(20,904)

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

(a)    For the 26 weeks ended October 30, 2021, gross margin includes a merchandise inventory loss of $434 in the Retail Segment. See Note 2. Summary of Significant Accounting Policies - Merchandise Inventories.

Note 5. Equity and Earnings Per Share

Equity

Share Repurchases

During the 26 weeks ended October 29, 2022, we did not repurchase shares of our Common Stock under the stock repurchase program and as of October 29, 2022, approximately $26,669 remains available under the stock repurchase program.

During the 26 weeks ended October 29, 2022, we repurchased 344,587 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Earnings Per Share

Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company.

During the 13 weeks ended October 29, 2022 and October 30, 2021, average shares of 3,153,516 and 523,447 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively. During the 26 weeks ended October 29, 2022 and October 30, 2021, average shares of 4,898,303 and 3,771,594 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

The following is a reconciliation of the basic and diluted earnings per share calculation:

	13 weeks ended				26 weeks ended
(shares in thousands)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Numerator for basic earnings per share:
Net income (loss) available to common shareholders	$	22,144	$	22,528	$	(30,563)	$	(21,100)
Less allocation of earnings to participating securities	(11)		(64)		—		—
Net income (loss) available to common shareholders	$	22,133	$	22,464	$	(30,563)	$	(21,100)
Numerator for diluted earnings per share:
Net income (loss) available to common shareholders	$	22,133	$	22,464	$	(30,563)	$	(21,100)
Allocation of earnings to participating securities	11		64		—		—
Less diluted allocation of earnings to participating securities	(11)		(61)		—		—
Net income (loss) available to common shareholders	$	22,133	$	22,467	$	(30,563)	$	(21,100)
Denominator for basic earnings per share:
Basic weighted average shares of Common Stock	52,438		51,666		52,305		51,570
Denominator for diluted earnings per share:
Basic weighted average shares of Common Stock	52,438		51,666		52,305		51,570
Average dilutive restricted stock units	141		611		—		—
Average dilutive performance shares	—		—		—		—
Average dilutive restricted shares	10		126		—		—
Average dilutive performance share units	—		255		—		—
Average dilutive stock options	606		1,910		—		—
Diluted weighted average shares of Common Stock	53,195		54,568		52,305		51,570
Earnings (Loss) per share of Common Stock:
Basic	$	0.42	$	0.43	$	(0.58)	$	(0.41)
Diluted	$	0.42	$	0.41	$	(0.58)	$	(0.41)

Note 6. Fair Value Measurements

In accordance with ASC No. 820, Fair Value Measurements and Disclosures, the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1—Observable inputs that reflect quoted prices in active markets

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions

Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable. The fair values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1. The fair value of short-term and long-term debt approximates its carrying value.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Non-Financial Assets and Liabilities

Our non-financial assets include goodwill, property and equipment, operating lease right-of-use assets, and intangible assets. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets.

Other Non-Financial Liabilities

We granted phantom share units as long-term incentive awards which are settled in cash based on the fair market value of a share of common stock of the Company at each vesting date. The fair value of the liability for the cash-settled phantom share unit awards will be remeasured at the end of each reporting period through settlement to reflect current risk-free rate and volatility assumptions. As of October 29, 2022, we recorded a liability of $1,398 (Level 2 input) which is reflected in accrued liabilities ($1,318) and other long-term liabilities ($80) on the condensed consolidated balance sheet. As of October 30, 2021, we recorded a liability of $3,474 (Level 2 input) which is reflected in accrued liabilities ($2,345) and other long-term liabilities ($1,129) on the condensed consolidated balance sheet. For additional information, see Note 10. Long-Term Incentive Plan Compensation Expense.

Note 7. Debt

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended March 31, 2021 and March 1, 2019, under which the lenders committed to provide us with a 5 year asset-backed revolving credit facility in an aggregate committed principal amount of $400,000 (the “Credit Facility”) effective from the March 1, 2019 amendment. We have the option to request an increase in commitments under the Credit Facility of up to $100,000, subject to certain restrictions. Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs. The agreement includes an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100,000 incremental facility maintaining the maximum availability under the Credit Agreement at $500,000. As of October 29, 2022, we were in compliance with all debt covenants under the Credit Agreement.

On March 4, 2022, we were granted a waiver to the condition to the draw scheduled for April 2022 under the FILO Facility, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $110,000. Under the waiver amendment, the commitment under the FILO Facility of $25,000 was increased to $40,000, with all remaining terms unchanged.

For additional information including interest terms and covenant requirements related to the Credit Facility, refer to Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

During the 26 weeks ended October 29, 2022, we borrowed $318,200 and repaid $321,900 under the Credit Agreement, with $222,000 of outstanding borrowings as of October 29, 2022, comprised entirely of borrowings under the Credit Facility. During the 26 weeks ended October 30, 2021, we borrowed $259,720 and repaid $254,020 under the Credit Agreement, with $183,300 of outstanding borrowings as of October 30, 2021, comprised entirely of borrowings under the Credit Facility. As of both October 29, 2022 and October 30, 2021, we have issued $4,759 in letters of credit under the Credit Facility.

Term Loan

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to our existing Credit Agreement. For additional information, see the Company’s Report on Form 8-K dated June 7, 2022 and filed with the SEC on June 10, 2022.

The Term Loan Credit Agreement provides for term loans in an amount equal to $30,000 (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”). The proceeds of the Term Loans are being used to finance working capital, and to pay fees and expenses related to the Term Loan Facility. During the 26 weeks ended October 29, 2022, we borrowed $30,000 and repaid $0 under the Term Loan Credit Agreement, with $30,000 of outstanding borrowings as of October 29, 2022.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

We incurred debt issuance costs totaling $1,964 related to the Term Loan Credit Agreement. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the Term Loan Facility.

The Term Loans accrue interest at a rate equal to 11.25%, payable quarterly, and mature on June 7, 2024. We have the right, through December 31, 2022, to pay all or a portion of the interest on the Term Loans in kind. To date, all interest on the term loan has been paid in cash. The Term Loans do not amortize prior to maturity. Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we must pay a fee of 1.5% of the outstanding principal amount of the Term Loans on such date.

The Term Loans are required to be repaid (i) after repayment of the FILO Facility under the Credit Agreement, with up to 100% of the proceeds of the sale of a non-core business line of the Company generating net proceeds in excess of $1,000, other than ordinary course dispositions and (ii) in full in connection with a debt or equity financing transaction generating net proceeds in excess of an amount sufficient to repay the FILO Facility under the Credit Agreement.

The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions. The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

The Credit Agreement amendment permitted us to incur the Term Loan Facility and also provides that, upon repayment of the Term Loan Credit Agreement (and, if applicable, any replacement credit facility thereof), we may incur second lien secured debt in an aggregate principal amount not to exceed $75,000.

Note 8. Leases

We recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements as required by FASB ASC 842, Leases (Topic 842). Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less).

We recognize a right of use ("ROU") asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year.

Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants.

We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

The following table summarizes lease expense:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Variable lease expense	$	25,281	$	30,738	$	40,465	$	42,440
Operating lease expense	52,998		48,990		75,860		65,363
Net lease expense	$	78,279	$	79,728	$	116,325	$	107,803

The increase in lease expense during the 26 weeks ended October 29, 2022 is primarily due to higher sales for contracts based on a percentage of revenue during the 26 weeks ended October 29, 2022, the impact of the timing due to contract renewals, and the increase in minimum contractual guarantees which were temporarily eliminated in the prior year due to limited on campus store traffic resulting from the COVID pandemic.

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of October 29, 2022:

	As of
	October 29, 2022
Remainder of Fiscal 2023	$	102,628
Fiscal 2024	58,137
Fiscal 2025	50,811
Fiscal 2026	38,301
Fiscal 2027	30,161
Thereafter	83,321
Total lease payments	363,359
Less: imputed interest	(41,799)
Operating lease liabilities at period end	$	321,560

Future lease payment obligations related to leases that were entered into, but did not commence as of October 29, 2022, were not material. The following summarizes additional information related to our operating leases:

	As of
	October 29, 2022			October 30, 2021
Weighted average remaining lease term (in years)	5.3 years			5.3 years
Weighted average discount rate	4.4		%	4.6		%
Supplemental cash flow information:
Cash payments for lease liabilities within operating activities	$	75,876		$	64,103
Right-of-use assets obtained in exchange for lease liabilities from initial recognition	$	86,045		$	77,811

Note 9. Supplementary Information

Restructuring and other charges

During the 13 and 26 weeks ended October 29, 2022, we recognized restructuring and other charges totaling $260 and $635, respectively, comprised primarily of costs associated with professional service costs for restructuring and process improvements.

During the 13 and 26 weeks ended October 30, 2021, we recognized restructuring and other charges totaling $1,116 and $3,021, respectively, comprised primarily of $418 and $1,250, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($754 is included in accrued liabilities in the condensed consolidated balance sheet as of October 30, 2021), $698 and $1,771, respectively, for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

20

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Note 10. Long-Term Incentive Plan Compensation Expense

We recognize compensation expense for restricted stock awards and performance share awards ratably over the requisite service period of the award, which is generally three years. We recognize compensation expense for these awards based on the number of awards expected to vest, which includes an estimated average forfeiture rate. We calculate the fair value of these awards based on the closing stock price on the date the award was granted. For those awards with market conditions, we have determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably over the requisite service period regardless of whether the market condition is satisfied.

For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte Carlo simulation model. The fair value models for stock options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of the options.

During the 26 weeks ended October 29, 2022, we granted the following awards:

•82,628 restricted stock units ("RSU") awards and 11,804 restricted stock ("RS") awards with a one year vesting period to the Board of Directors ("BOD") members for annual compensation.

•878,247 restricted stock units ("RSU") awards to employees with a three year vesting period.

•322,495 stock options with an exercise price of $2.36 per stock option, which was the fair market value on the date of grant (Stock Option Grant #1) and 348,723 stock options with an exercise price of $4.86 per stock option, which was above the fair market value on the date of grant, (Stock Option Grant #2) granted to employees. The stock options are exercisable in four equal annual installments commencing one year after the date of grant and have a ten year term. Holders are not entitled to receive dividends (if any) prior to vesting and exercise of the options. The following summarizes the stock option fair value assumptions:

	Stock Option Grant #1			Stock Option Grant #2
Exercise Price	$	2.36		$	4.86
Valuation method utilized	Black-Scholes			Monte Carlo
Risk-free interest rate	3.28		%	3.28		%
Expected option term	6.3 years			10.0 years
Company volatility	74		%	74		%
Dividend yield	—		%	—		%
Grant date fair value per award	$	1.61		$	1.28

The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected stock option term. For Stock Option Grant #1, we are permitted to use the simplified approach to estimate the expected term of the stock options, which typically assumes exercise occurs at the mid-point between the end of the vesting period and the expiration date. The simplified approach is not allowed for premium-priced options (Stock Option Grant #2), which were estimated using a stock price multiple, as there is no option exercise history which to base an early exercise option. The expected stock option term represents the weighted average period of time that stock options granted are expected to be outstanding, based on vesting schedules and the contractual term of the stock options. Volatility is based on the historical volatility of the Company’s common stock over a period of time corresponding to the expected stock option term.

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BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

We recognized compensation expense for long-term incentive plan awards in selling and administrative expenses as follows:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Stock-based awards
Restricted stock expense	$	64	$	119	$	158	$	207
Restricted stock units expense	990		931		2,013		1,661
Performance share units expense	—		29		10		63
Stock option expense	665		399		1,329		669
Sub-total stock-based awards:	$	1,719	$	1,478	$	3,510	$	2,600
Cash settled awards
Phantom share units expense	$	66	$	2,452	$	268	$	4,924
Total compensation expense for long-term incentive awards	$	1,785	$	3,930	$	3,778	$	7,524

Total unrecognized compensation cost related to unvested awards as of October 29, 2022 was $13,077 and is expected to be recognized over a weighted-average period of 2.3 years.

Note 11. Employee Benefit Plans

We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC and DSS. MBS maintains a profit sharing plan covering substantially all full-time employees of MBS. For all plans, we are responsible to fund the employer contributions directly. Total employee benefit expense for these plans was $1,069 and $1,004 during the 13 weeks ended October 29, 2022 and October 30, 2021, respectively. Total employee benefit expense for these plans was $2,394 and $1,048 during the 26 weeks ended October 29, 2022 and October 30, 2021, respectively.

Effective April 2020, due to the significant impact as a result of COVID-19 related campus store closures, we temporarily suspended employer matching contributions into our 401(k) plans. The matching contributions were reinstated effective July 25, 2021.

Note 12. Income Taxes

We recorded an income tax benefit of $(300) on pre-tax income of $21,844 during the 13 weeks ended October 29, 2022, which represented an effective income tax rate of (1.4)% and an income tax benefit of $(203) on pre-tax income of $22,325 during the 13 weeks ended October 30, 2021, which represented an effective income tax rate of (0.9)%.

We recorded an income tax expense of $633 on pre-tax loss of $(29,930) during the 26 weeks ended October 29, 2022, which represented an effective income tax rate of (2.1)% and an income tax expense of $196 on pre-tax loss of $(20,904) during the 26 weeks ended October 30, 2021, which represented an effective income tax rate of (0.9)%.

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. As of October 29, 2022, we determined that it was more likely than not that we would not realize all deferred tax assets and our tax rate for the current fiscal year reflects this determination. We will continue to evaluate this position.

The effective tax rate for the 13 and 26 weeks ended October 29, 2022 is lower as compared to the prior year comparable period due to foreign taxes and lower projected annual taxable loss in the current year.

Note 13. Legal Proceedings

We are involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of our business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, personal injuries and other matters. The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on our condensed consolidated financial position, results of operations, or cash flows.

22

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the 13 and 26 weeks ended October 29, 2022 and October 30, 2021

(Thousands of dollars, except share and per share data)

(unaudited)

Note 14. Subsequent Event

On December 2, 2022, the Board of Directors approved a company-wide initiative to drive efficiencies, streamline operations, simplify the organizational structure and further reduce non-essential costs. These actions are expected to be substantially implemented within thirty days. The Company expects to incur restructuring charges, primarily related to severance, of approximately $5,000 to $6,000 in the third quarter of fiscal 2023 and expects to save $10,000 to $15,000 in fiscal year 2023. These initiatives are expected to provide annualized savings of $30,000 to $35,000 once fully implemented. The restructuring charges are excluded from non-GAAP adjusted EBITDA and from the annualized and fiscal year 2023 savings.

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Item 2:    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise indicates, references to “we,” “us,” “our” and “the Company” refer to Barnes & Noble Education, Inc. or “BNED”, a Delaware corporation. References to “Barnes & Noble College” or “BNC” refer to our subsidiary Barnes & Noble College Booksellers, LLC. References to “MBS” refer to our subsidiary MBS Textbook Exchange, LLC.

Overview

Description of Business

Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions. We operate 1,399 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment. Additionally, we offer direct-to-student products and services to help students study more effectively and improve academic performance.

The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands. We expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such capabilities through our merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. (“FLC”) (collectively referred to herein as the “FLC Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect gross general merchandise sales to continue to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the FLC Partnership. Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo and emblematic general merchandise business.

The Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States. Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.

For additional information related to our business, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Cost Savings Initiative

On December 2, 2022, the Board of Directors approved a company-wide initiative to drive efficiencies, streamline operations, simplify the organizational structure and further reduce non-essential costs. These actions are expected to be substantially implemented within thirty days. The Company expects to incur restructuring charges, primarily related to severance, of approximately $5 million to $6 million in the third quarter of fiscal 2023 and expects to save $10 million to $15 million in fiscal year 2023. These initiatives are expected to provide annualized savings of $30 million to $35 million once fully implemented. The restructuring charges are excluded from non-GAAP adjusted EBITDA and from the annualized and fiscal year 2023 savings.

First Day Inclusive and Equitable Access Programs

We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. We offer our BNC First Day® inclusive and equitable access programs, consisting of First Day Complete and First Day, in which course materials, including both physical and digital content, are offered at a reduced price through a course fee or included in tuition, and delivered to students on or before the first day of class.

•First Day Complete is adopted by an institution and includes all classes, providing students both physical and digital materials. The First Day Complete model drives substantially greater unit sales and sell-through for the bookstore.

•Through First Day, digital course materials are adopted by a faculty member for a single course, and students receive their materials through their school's learning management system.

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Offering courseware sales through our inclusive and equitable access First Day Complete and First Day models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. We expect these programs to allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has been observed at those schools where such programs have been adopted. We are moving quickly and decisively to accelerate our First Day Complete strategy. We plan to move many institutions to First Day Complete for the Fall of 2023 and the majority of schools by Fall 2024.

Approximately 111 campus stores adopted our First Day Complete course materials delivery program for the 2022 Fall Term, representing approximately 545,000 (as reported by National Center for Education Statistics) in total undergraduate student enrollment, a growth rate of 85% over Fall 2021. During the 13 weeks ended October 29, 2022, First Day Complete sales increased by $44.3 million to $89.9 million, or 97%, as compared to $45.6 million in the prior year period. During the 26 weeks ended October 29, 2022, First Day Complete sales increased by $54.7 million to $106.3 million, or 106%, as compared to $51.6 million in the prior year period.

Partnership with Fanatics and FLC

In December 2020, we entered into the FLC Partnership. Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our general merchandise business. Fanatics’ cutting-edge e-commerce and technology expertise offers our campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with Lids (FLC's parent company), the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.

We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores. We also work closely with our campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites. FLC manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores, and FLC owns the inventory it manages, relieving us of the obligation to finance inventory purchases from working capital.

COVID-19 Business Impact

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities. Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years. We cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations. Although most four year schools returned to a traditional on-campus environment, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

Segments

We have three reportable segments: Retail, Wholesale and DSS. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as “Corporate Services”.

We identify our segments in accordance with the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance. The following summarizes the three segments. For additional information about each segment's operations, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Retail Segment

The Retail Segment operates 1,399 college, university, and K-12 school bookstores, comprised of 793 physical bookstores and 606 virtual bookstores. Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce websites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts. The Retail Segment also offers inclusive and equitable access programs, in which

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course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

Wholesale Segment

The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,100 physical bookstores (including our Retail Segment's 793 physical bookstores) and sources and distributes new and used textbooks to our 606 virtual bookstores. Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 350 college bookstores.

DSS Segment

The Digital Student Solutions (“DSS”) Segment includes products and services to assist students to study more effectively and improve academic performance. The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby®, an institutional and direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, writing and tutoring.

Corporate Services represents unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

Seasonality

Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April.

For our retail operations, sales are generally highest in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials, and lowest in the first and fourth fiscal quarters. Sales attributable to our wholesale business are generally highest in our first, second and third quarter, as it sells textbooks and other course materials for retail distribution. For our DSS segment, or direct-to-student business, sales and operating profit are realized relatively consistently throughout the year.

Trends, Competition and Other Business Conditions Affecting Our Business

The market for educational materials is undergoing unprecedented change. As tuition and other costs rise, colleges and universities face increasing pressure to attract and retain students and provide them with innovative, affordable educational content and tools that support their educational development. Current trends, competition and other factors affecting our business include:

•Overall Economic Environment, Capital Markets, College Enrollment and Consumer Spending Patterns. Our business is affected by the impact of the COVID-19 pandemic, the overall economic environment, capital markets, funding levels at colleges and universities, by changes in enrollments at colleges and universities, and spending on course materials and general merchandise.

•Impact of the COVID-19 Pandemic: The COVID-19 pandemic has materially and adversely impacted certain segments of the U.S. economy, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors. Many colleges and K-12 schools had been required to cease in-person classes in an attempt to limit the spread of the COVID-19 virus and ensure the safety of their students. Although many academic institutions have since reopened, some are providing alternatives to traditional in-person instruction, including online and hybrid learning options and significantly reduced classroom sizes. While many athletic conferences resumed their sport activities, other events, such as parent and alumni weekends and prospective student campus tour activities, some may still be curtailed. Additionally, our business, like many others has been affected by the challenging labor market and the ability to recruit employees. The impact of COVID-19 store closings during Fiscal 2021 to Fiscal 2022 resulted in the loss of cash flow and increased borrowings that we would not otherwise have expected to incur.

•Economic Environment: Retail general merchandise sales are subject to short-term fluctuations driven by the broader retail environment and other economic factors, such as interest rate fluctuations and inflationary considerations. The broader macro-economic global supply chain issues have impacted our ability to source textbooks, school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing. A significant reduction in U.S. economic activity could lead to decreased consumer spending.

•Capital Market Trends: We may require additional capital in the future to sustain or grow our business. The future availability of financing will depend on a variety of factors, such as economic and market conditions, and the

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availability of credit. These factors could materially adversely affect our costs of borrowing, and our financial position and results of operations would be adversely impacted. Volatility in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions.

•Enrollment Trends: The growth of our business depends on our ability to attract new customers and to increase the level of engagement by our current student customers. We continue to see downward enrollment trends. Enrollment trends, specifically at community colleges, generally correlate with changes in the economy and unemployment factors, e.g., low unemployment tends to lead to low enrollment and higher unemployment rates tend to lead to higher enrollment trends, as students generally enroll to obtain skills that are in demand in the workforce. Enrollment trends have been negatively impacted overall by COVID-19 concerns at physical campuses. Additionally, enrollment trends are impacted by the dip in the United States birth rate resulting in fewer students at the traditional 18-24 year-old college age. Online degree program enrollments continue to grow, even in the face of declining overall higher education enrollment.

•Increased Use of Online and Digital Platforms as Companions or Alternatives to Printed Course Materials. Students and faculty can now choose from a wider variety of educational content and tools than ever before, delivered across both print and digital platforms.

•Increasing Costs Associated with Defending Against Security Breaches and Other Data Loss, Including Cyber-Attacks. We are increasingly dependent upon information technology systems, infrastructure and data. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. We continue to invest in data protection, including insurance, and information technology to prevent or minimize these risks and, to date, we have not experienced any material service interruptions and are not aware of any material breaches.

•Distribution Network Evolving. The way course materials are distributed and consumed is changing significantly, a trend that is expected to continue. The market for course materials, including textbooks and supplemental materials, is intensely competitive and subject to rapid change.

•Disintermediation. We are experiencing growing competition from alternative media and alternative sources of textbooks and other course materials. In addition to the official physical or virtual campus bookstore, course materials are also sold through off-campus bookstores, e-commerce outlets, digital platform companies, publishers, including Cengage, Pearson and McGraw Hill, bypassing the bookstore distribution channel by selling or renting directly to students and educational institutions, and student-to-student transactions over the Internet.

•Supply Chain and Inventory. Since the demand for used textbooks has historically been greater than the available supply, our financial results are highly dependent upon Wholesale’s ability to build its textbook inventory from suppliers in advance of the selling season. Recently, the impact of fewer students on campus due to COVID-19 has significantly impacted our on-campus buyback programs which supplies Wholesale’s used textbook inventory for future selling periods. Some textbook publishers have begun to supply textbooks pursuant to consignment or rental programs which could impact used textbook supplies in the future. Additionally, Wholesale is a national distributor for rental textbooks offered through McGraw-Hill Education's and Pearson Education’s consignment rental program, both of which are relatively nascent. The broader macro-economic global supply chain issues may also impact our ability to source school supplies and general merchandise sold in our campus bookstores, including technology-related products and emblematic clothing.

•Price Competition. In addition to the competition in the services we provide to our customers, our textbook and other course materials business faces significant price competition. Students purchase textbooks and other course materials from multiple providers, are highly price sensitive, and can easily shift spending from one provider or format to another.

•A Large Number of Traditional Campus Bookstores Have Yet to be Outsourced.

•Outsourcing Trends. We continue to see the trend towards outsourcing in the campus bookstore market and also continue to see a variety of business models being pursued for the provision of course materials (such as inclusive and equitable access programs and publisher subscription models) and general merchandise.

•New and Existing Bookstore Contracts. We expect awards of new accounts resulting in new physical and virtual store openings will continue to be an important driver of future growth in our business. Offering courseware sales through our inclusive and equitable access First Day Complete and First Day models is a key, and increasingly important, strategic initiative of ours to meet the market demands of substantially reduced pricing to students. Our First Day Complete and First Day programs contribute to improved student outcomes, while increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. We expect these programs to

27

allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has been observed at those schools where such programs have been adopted. We are moving quickly and decisively to accelerate our First Day Complete strategy. While we plan to move many institutions to First Day Complete for the Fall of 2023, and the majority of our schools by Fall 2024, we cannot guarantee that we will be able to achieve these plans within these timeframes or at all. We also expect that certain less profitable or non-essential bookstores we operate may close. The scope of any such store closures remains uncertain, although we are not aware, at this time, of any significant volume of stores which we operate that are likely to close or have informed us of upcoming closures.

For additional discussion of our trends and other factors affecting our business, see Part I - Item 1. Business in our Annual Report on Form 10-K for the year ended April 30, 2022.

Elements of Results of Operations

Our condensed consolidated financial statements reflect our consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). The results of operations reflected in our consolidated financial statements are presented on a consolidated basis. All material intercompany accounts and transactions have been eliminated in consolidation.

Our sales are primarily derived from the sale of course materials, which include new, used and digital textbooks, and at college and university bookstores which we operate, we sell high margin general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products. Our rental income is primarily derived from the rental of physical textbooks. We also derive revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, direct-to-student subscription-based services, and other services.

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our direct-to-student subscription-based services business. Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services as discussed in the Overview - Segments discussion above.

Results of Operations - Summary

	13 weeks ended				26 weeks ended
Dollars in thousands	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Sales:
Product sales and other (a)	$	575,764	$	577,329	$	828,710	$	805,099
Rental income	41,334		49,648		52,246		62,672
Total sales	$	617,098	$	626,977	$	880,956	$	867,771
Net income (loss)	$	22,144	$	22,528	$	(30,563)	$	(21,100)
Adjusted Earnings (non-GAAP) (b)	$	24,022	$	24,955	$	(26,733)	$	(15,059)
Adjusted EBITDA by Segment (non-GAAP) (b)
Retail	$	39,416	$	39,444	$	14,431	$	19,822
Wholesale	1,588		1,233		4,356		7,647
DSS	180		807		1,069		2,499
Corporate Services	(5,075)		(6,809)		(12,289)		(14,253)
Elimination	3,258		4,293		(1,621)		(1,244)
Total Adjusted EBITDA (non-GAAP)	$	39,367	$	38,968	$	5,946	$	14,471

(a)Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. The transition to FLC for campus

28

stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition. For Retail Gross Comparable Store Sales details, see below.

(b)Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment are non-GAAP financial measures. See Use of Non-GAAP Measures discussion below.

The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Sales:
Product sales and other	93.3	%	92.1	%	94.1	%	92.8	%
Rental income	6.7		7.9		5.9		7.2
Total sales	100.0		100.0		100.0		100.0
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales (a)	78.0		78.5		77.6		77.9
Rental cost of sales (a)	55.5		57.1		55.9		55.8
Total cost of sales	76.5		76.8		76.4		76.3
Gross margin	23.5		23.2		23.6		23.7
Selling and administrative expenses	17.4		17.2		23.3		22.4
Depreciation and amortization expense	1.7		1.9		2.6		2.8
Restructuring and other charges	—		0.2		0.1		0.3
Operating income (loss)	4.4	%	3.9	%	(2.4)	%	(1.8)	%

(a)Represents the percentage these costs bear to the related sales, instead of total sales.

Results of Operations - 13 and 26 weeks ended October 29, 2022 compared with the 13 and 26 weeks ended October 30, 2021

	13 weeks ended October 29, 2022
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total
Sales:
Product sales and other	$	557,276	$	21,120	$	8,465	$	—	$	(11,097)	$	575,764
Rental income	41,334		—		—		—		—		41,334
Total sales	598,610		21,120		8,465		—		(11,097)		617,098
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	446,167		15,665		1,771		—		(14,281)		449,322
Rental cost of sales	22,941		—		—		—		—		22,941
Total cost of sales	469,108		15,665		1,771		—		(14,281)		472,263
Gross profit	129,502		5,455		6,694		—		3,184		144,835
Selling and administrative expenses	90,086		3,867		8,132		5,075		(74)		107,086
Depreciation and amortization expense	8,869		1,370		503		17		—		10,759
Restructuring and other charges	—		—		—		260		—		260
Operating income (loss)	$	30,547	$	218	$	(1,941)	$	(5,352)	$	3,258	$	26,730

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	13 weeks ended October 30, 2021
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total
Sales:
Product sales and other	$	559,304	$	21,669	$	8,279	$	—	$	(11,923)	$	577,329
Rental income	49,648		—		—		—		—		49,648
Total sales	608,952		21,669		8,279		—		(11,923)		626,977
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	451,779		16,049		1,373		—		(16,131)		453,070
Rental cost of sales	28,348		—		—		—		—		28,348
Total cost of sales	480,127		16,049		1,373		—		(16,131)		481,418
Gross profit	128,825		5,620		6,906		—		4,208		145,559
Selling and administrative expenses	89,486		4,387		7,305		6,809		(85)		107,902
Depreciation and amortization expense	8,669		1,364		1,902		17		—		11,952
Restructuring and other charges	1,075		—		—		41		—		1,116
Operating income (loss)	$	29,595	$	(131)	$	(2,301)	$	(6,867)	$	4,293	$	24,589

	26 weeks ended October 29, 2022
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total
Sales:
Product sales and other	$	782,871	$	58,203	$	17,649	$	—	$	(30,013)	$	828,710
Rental income	52,246		—		—		—		—		52,246
Total sales	835,117		58,203		17,649		—		(30,013)		880,956
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	622,416		45,849		3,472		—		(28,310)		643,427
Rental cost of sales	29,206		—		—		—		—		29,206
Total cost of sales	651,622		45,849		3,472		—		(28,310)		672,633
Gross profit	183,495		12,354		14,177		—		(1,703)		208,323
Selling and administrative expenses	169,090		7,998		16,277		12,289		(82)		205,572
Depreciation and amortization expense	18,398		2,719		2,140		35		—		23,292
Restructuring and other charges	—		—		—		635		—		635
Operating (loss) income	$	(3,993)	$	1,637	$	(4,240)	$	(12,959)	$	(1,621)	$	(21,176)

	26 weeks ended October 30, 2021
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services		Eliminations		Total
Sales:
Product sales and other	$	756,749	$	66,153	$	16,582	$	—	$	(34,385)	$	805,099
Rental income	62,672		—		—		—		—		62,672
Total sales	819,421		66,153		16,582		—		(34,385)		867,771
Cost of sales (exclusive of depreciation and amortization expense):
Product and other cost of sales	607,501		50,128		2,646		—		(33,044)		627,231
Rental cost of sales	34,952		—		—		—		—		34,952
Total cost of sales	642,453		50,128		2,646		—		(33,044)		662,183
Gross profit	176,968		16,025		13,936		—		(1,341)		205,588
Selling and administrative expenses	157,851		8,378		13,752		14,253		(97)		194,137
Depreciation and amortization expense	18,076		2,664		3,801		35		—		24,576
Restructuring and other charges	2,083		—		—		938		—		3,021
Operating (loss) income	$	(1,042)	$	4,983	$	(3,617)	$	(15,226)	$	(1,244)	$	(16,146)

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Sales

The following table summarizes our sales for the 13 and 26 weeks ended October 29, 2022 and October 30, 2021:

	13 weeks ended							26 weeks ended
Dollars in thousands	October 29, 2022		October 30, 2021		Var $		Var %	October 29, 2022		October 30, 2021		Var $		Var %
Product sales and other	$	575,764	$	577,329	$	(1,565)	(0.3)%	$	828,710	$	805,099	$	23,611	2.9%
Rental income	41,334		49,648		$	(8,314)	(16.7)%	52,246		62,672		$	(10,426)	(16.6)%
Total Sales	$	617,098	$	626,977	$	(9,879)	(1.6)%	$	880,956	$	867,771	$	13,185	1.5%

The sales decrease during the 13 weeks ended October 29, 2022 is primarily related to lower course material sales primarily due to the shift to more digital course materials, partially offset by higher general merchandise sales as many schools approach a more traditional on campus learning experience.

The sales increase during the 26 weeks ended October 29, 2022 is primarily related to higher general merchandise sales as many schools approach a more traditional on campus learning experience, partially offset by lower course material sales primarily due to the shift to more digital course materials.

The components of the variances for the 13 and 26 week periods are reflected in the table below.

Sales variances	13 weeks ended		26 weeks ended
Dollars in millions	October 29, 2022		October 29, 2022
Retail Sales
New stores	$	40.1	$	51.9
Closed stores	(19.1)		(24.5)
Comparable stores (a)	(16.7)		4.8
Textbook rental deferral	(10.0)		(11.2)
Service revenue (b)	(1.9)		(2.4)
Other (c)	(2.7)		(2.9)
Retail sales subtotal:	$	(10.3)	$	15.7
Wholesale Sales	$	(0.6)	$	(8.0)
DSS Sales	$	0.2	$	1.1
Eliminations (d)	$	0.8	$	4.4
Total sales variance:	$	(9.9)	$	13.2

(a)    In December 2020, we entered into merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. (“FLC”) (collectively referred to herein as the “FLC Partnership”). Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition. For Retail Gross Comparable Store Sales details, see below.

(b)    Service revenue includes brand partnerships, shipping and handling, and revenue from other programs.

(c)    Other includes inventory liquidation sales to third parties, marketplace sales and certain accounting adjusting items related to return reserves, and other deferred items.

(d)    Eliminates Wholesale sales and service fees to Retail and Retail commissions earned from Wholesale. See discussion of intercompany activities and eliminations below.

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Retail

The following is a store count summary for physical stores and virtual stores. Many of the store closings relate to closing less profitable stores, including satellite store locations.

	13 weeks ended						26 weeks ended
	October 29, 2022			October 30, 2021			October 29, 2022			October 30, 2021
Number of Stores:	Physical	Virtual	Total	Physical	Virtual	Total	Physical	Virtual	Total	Physical	Virtual	Total
Beginning of period	793	613	1,406	784	645	1,429	805	622	1,427	769	648	1,417
Opened	8	10	18	11	12	23	34	24	58	41	35	76
Closed	8	17	25	1	6	7	46	40	86	16	32	48
End of period	793	606	1,399	794	651	1,445	793	606	1,399	794	651	1,445

Generally, sales are impacted by revenue from net new/closed stores, increased campus traffic, and an increase in the number of on campus activities and events, such as graduations, alumni events and prospective student campus tours, as schools approach a more traditional campus experience. We continued to experience higher general merchandise sales, especially for graduation products, logo and emblematic products, and cafe and convenience products, as on campus traffic continues to grow compared to the prior year. Sales were also negatively impacted by lower enrollments, primarily at community colleges and by international students, and the continuation of remote and hybrid class offerings.

Retail sales decreased by $10.3 million, or 1.7%, to $598.6 million during the 13 weeks ended October 29, 2022 from $608.9 million during the 13 weeks ended October 30, 2021.  

•Product sales and other decreased by $2.0 million, or 0.4%, to $557.3 million during the 13 weeks ended October 29, 2022 from $559.3 million during the 13 weeks ended October 30, 2021. During the 13 weeks ended October 29, 2022, total course material product sales decreased by $13.9 million, or 3.2%, to $419.9 million; and service and other revenue decreased by $4.6 million, or 23.9%, to $14.7 million primarily due to lower shipping and handling income resulting from increased in-store order fulfillment; partially offset by an increase in total general merchandise product sales of $16.4 million, or 15.5%, to $122.7 million as students return to on campus activities.

•Course material product sales decreased primarily due to the shift to more digital course materials. Additionally, the First Day programs increased rental textbook activity, increasing deferred revenue for the Fall term into the third quarter. Revenue from both of our First Day models offset this decline with increased total revenue of $47.2 million to $143.2 million, or 49%, during the 13 weeks ended October 29, 2022, as compared to $96.0 million during the 13 weeks ended October 30, 2021. Specifically, First Day Complete total sales increased by $44.3 million to $89.9 million, or 97%, during the 13 weeks ended October 29, 2022, as compared to $45.6 million during the 13 weeks ended October 30, 2021. Approximately 111 campus stores adopted our First Day Complete course materials delivery program for the 2022 Fall Term, representing approximately 545,000 (as reported by National Center for Education Statistics) in total undergraduate student enrollment, a growth rate of 85% over Fall 2021.

•Total course material rental income decreased by $8.3 million, or 16.7%, to $41.3 million during the 13 weeks ended October 29, 2022 from $49.6 million during the 13 weeks ended October 30, 2021 primarily due to the shift to more digital course materials.

Retail sales increased by $15.7 million, or 1.9%, to $835.1 million during the 26 weeks ended October 29, 2022 from $819.4 million during the 26 weeks ended October 30, 2021.

•Product sales and other increased by $26.1 million, or 3.5%, to $782.9 million during the 26 weeks ended October 29, 2022 from $756.7 million during the 26 weeks ended October 30, 2021. During the 26 weeks ended October 29, 2022, total general merchandise product sales increased by $39.8 million, or 23.2%, to $211.5 million as students return to on campus activities; offset by a decrease in total course material product sales of $8.5 million, or 1.5%, to $547.5 million; and a decrease in service and other revenue of $5.2 million, or 18.0%, to $23.9 million, primarily due to lower shipping and handling income resulting from increased in-store order fulfillment.

•Course material product sales decreased primarily due to the shift to more digital course materials. Additionally, the First Day programs increased rental textbook activity, increasing deferred revenue for the Fall term into the third quarter. Revenue from both of our First Day models offset this decline with increased total revenue of $65.2 million to $188.2 million, or 53%, during the 26 weeks ended October 29, 2022, as compared to $123.0 million during the 26 weeks ended October 30, 2021. Specifically, First Day Complete total sales increased by $54.7 million to $106.3 million, or 106%, during the 26 weeks ended October 29, 2022, as compared to $51.6 million during the 26 weeks ended October 30, 2021. Approximately 111 campus stores adopted our First Day Complete course materials delivery program for the 2022 Fall Term, representing approximately 545,000 (as reported by National Center for Education Statistics) in total undergraduate student enrollment, a growth rate of 85% over Fall 2021.

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•Total course material rental income decreased by $10.4 million, or 16.6%, to $52.2 million during the 26 weeks ended October 29, 2022 from $62.7 million during the 26 weeks ended October 30, 2021 primarily due to the shift to more digital course materials.

Retail Gross Comparable Store Sales

During the 13 and 26 weeks ended October 29, 2022, logo and emblematic sales are reflected in sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis for the majority of our e-commerce websites during the 26 weeks ended October 30, 2021.

To supplement the Total Sales table presented above, the Company uses Retail Gross Comparable Store Sales as a key performance indicator. Retail Gross Comparable Store Sales includes sales from physical and virtual stores that have been open for an entire fiscal year period and does not include sales from permanently closed stores for all periods presented. For Retail Gross Comparable Store Sales, sales for logo and emblematic general merchandise fulfilled by FLC, Fanatics and digital agency sales are included on a gross basis for consistent year-over-year comparison.

Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition.

We believe the current Retail Gross Comparable Store Sales calculation method reflects management’s view that such comparable store sales are an important measure of the growth in sales when evaluating how established stores have performed over time. We present this metric as additional useful information about the Company’s operational and financial performance and to allow greater transparency with respect to important metrics used by management for operating and financial decision-making. Retail Gross Comparable Store Sales are also referred to as "same-store" sales by others within the retail industry and the method of calculating comparable store sales varies across the retail industry. As a result, our calculation of comparable store sales is not necessarily comparable to similarly titled measures reported by other companies and is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

During the 13 and 26 weeks ended October 29, 2022, Retail Gross Comparable Store general merchandise sales increased by 4.5% and 14.9%, respectively. During the 13 and 26 weeks ended October 29, 2022, Retail Gross Comparable Store course material sales decreased by 4.6% and 3.2%, respectively. The decrease in course material sales was primarily due to a shift to lower cost options and more affordable solutions, including digital offerings, offset by the growth of First Day inclusive and equitable access programs, digital and eTextbook revenue increases.

Revenue from both of our First Day models offset the course materials declines. Total revenue from our First Day models increased by $47.2 million to $143.2 million, or 49%, during the 13 weeks ended October 29, 2022, as compared to $96.0 million during the 13 weeks ended October 30, 2021. Specifically, First Day Complete total sales increased by $44.3 million to $89.9 million, or 97%, during the 13 weeks ended October 29, 2022, as compared to $45.6 million during the 13 weeks ended October 30, 2021. Total revenue from our First Day models increased by $65.2 million to $188.2 million, or 53%, during the 26 weeks ended October 29, 2022, as compared to $123.0 million during the 26 weeks ended October 30, 2021. Specifically, First Day Complete total sales increased by $54.7 million to $106.3 million, or 106%, during the 26 weeks ended October 29, 2022, as compared to $51.6 million during the 13 weeks ended October 30, 2021.

Retail Gross Comparable Store Sales variances by category for the 13 week periods are as follows:

	13 weeks ended								26 weeks ended
Dollars in millions	October 29, 2022				October 30, 2021				October 29, 2022				October 30, 2021
Textbooks (Course Materials)	$	(21.8)	(4.6)	%	$	(0.5)	(0.1)	%	$	(19.5)	(3.2)	%	$	22.9	4.1	%
General Merchandise	7.7		4.5	%	74.0		76.6	%	39.2		14.9	%	124.7		89.5	%
Total Retail Gross Comparable Store Sales	$	(14.1)	(2.2)	%	$	73.5	13.2	%	$	19.7	2.3	%	$	147.6	21.0	%

Wholesale

Wholesale sales decreased by $0.6 million, or 2.5% to $21.1 million during the 13 weeks ended October 29, 2022 from $21.7 million during the 13 weeks ended October 30, 2021. Wholesale sales decreased by $8.0 million, or 12.0% to $58.2 million during the 26 weeks ended October 29, 2022 from $66.2 million during the 26 weeks ended October 30, 2021. The decrease is primarily due to lower gross sales impacted by supply constraints resulting from the lack of textbook purchasing opportunities during the prior fiscal year, a decrease in customer demand resulting from a shift in buying patterns from physical textbooks to digital products, and lower demand from other third-party clients, partially offset by lower returns and allowances.

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DSS

DSS total sales increased by $0.2 million, or 2.3% to $8.5 million during the 13 weeks ended October 29, 2022 from $8.3 million during the 13 weeks ended October 30, 2021. DSS total sales increased by $1.1 million, or 6.4% to $17.6 million during the 26 weeks ended October 29, 2022 from $16.6 million during the 26 weeks ended October 30, 2021. Sales increased primarily due to an increase in Student Brands subscription sales.

Cost of Sales and Gross Margin

Our cost of sales decreased as a percentage of sales to 76.5% during the 13 weeks ended October 29, 2022 compared to 76.8% during the 13 weeks ended October 30, 2021. Our gross margin decreased by $0.7 million, or 0.5%, to $144.8 million, or 23.5% of sales, during the 13 weeks ended October 29, 2022 from $145.6 million, or 23.2% of sales during the 13 weeks ended October 30, 2021.

Our cost of sales increased as a percentage of sales to 76.4% during the 26 weeks ended October 29, 2022 compared to 76.3% during the 26 weeks ended October 30, 2021. Our gross margin increased by $2.7 million, or 1.3%, to $208.3 million, or 23.6% of sales, during the 26 weeks ended October 29, 2022 from $205.6 million, or 23.7% of sales during the 13 weeks ended October 30, 2021. During the 26 weeks ended October 30, 2021, we recognized a merchandise inventory loss of $0.4 million in cost of goods sold in the Retail Segment discussed below. For additional information, see Item 1. Financial Statements - Note 2. Summary of Significant Accounting Policies - Merchandise Inventories.

Retail

The following table summarizes the Retail cost of sales for the 13 and 26 weeks ended October 29, 2022 and October 30, 2021: 

	13 weeks ended						26 weeks ended
Dollars in thousands	October 29, 2022		% of Related Sales	October 30, 2021		% of Related Sales	October 29, 2022		% of Related Sales	October 30, 2021		% of Related Sales
Product and other cost of sales	$	446,167	80.1%	$	451,779	80.8%	$	622,416	79.5%	$	607,501	80.3%
Rental cost of sales	22,941		55.5%	28,348		57.1%	29,206		55.9%	34,952		55.8%
Total Cost of Sales	$	469,108	78.4%	$	480,127	78.8%	$	651,622	78.0%	$	642,453	78.4%

The following table summarizes the Retail gross margin for the 13 and 26 weeks ended October 29, 2022 and October 30, 2021:

	13 weeks ended						26 weeks ended
Dollars in thousands	October 29, 2022		% of Related Sales	October 30, 2021		% of Related Sales	October 29, 2022		% of Related Sales	October 30, 2021		% of Related Sales
Product and other gross margin	$	111,109	19.9%	$	107,525	19.2%	$	160,455	20.5%	$	149,248	19.7%
Rental gross margin	18,393		44.5%	21,300		42.9%	23,040		44.1%	27,720		44.2%
Gross Margin	$	129,502	21.6%	$	128,825	21.2%	$	183,495	22.0%	$	176,968	21.6%

For the 13 weeks ended October 29, 2022, the Retail gross margin as a percentage of sales increased as discussed below:

•Product and other gross margin increased (70 basis points), driven primarily by a favorable sales mix (75 basis points) due to higher general merchandise sales and higher margin rates (5 basis points) due to lower markdowns, partially offset by higher contract costs as a percentage of sales related to our college and university contracts (10 basis points) resulting from contract renewals and new store contracts.

•Rental gross margin increased (160 basis points), driven primarily by a favorable rental mix (205 basis points), and higher margin rates (85 basis points), partially offset by higher contract costs as a percentage of sales related to our college and university contracts (125 basis points) resulting from contract renewals and new store contracts.

For the 26 weeks ended October 29, 2022, the Retail gross margin as a percentage of sales increased as discussed below:

•Product and other gross margin increased (80 basis points), driven primarily by a favorable sales mix (155 basis points) due to higher general merchandise sales and higher margin rates (70 basis points) due to lower markdowns, partially offset by higher contract costs as a percentage of sales related to our college and university contracts (150 basis points) resulting from contract renewals and new store contracts.

34

•Rental gross margin decreased (10 basis points), driven primarily by higher contract costs as a percentage of sales related to our college and university contracts (215 basis points) resulting from contract renewals and new store contracts, partially offset by a favorable rental mix (160 basis points) and higher rental margin rates (45 basis points).

Wholesale

The cost of sales and gross margin for Wholesale were $15.7 million, or 74.2% of sales, and $5.5 million, or 25.8% of sales, respectively, during the 13 weeks ended October 29, 2022. The cost of sales and gross margin for Wholesale was $16.1 million or 74.1% of sales and $5.6 million or 25.9% of sales, respectively, during the 13 weeks ended October 30, 2021. The gross margin rate decreased during the 13 weeks ended October 29, 2022 primarily due to higher markdowns.

The cost of sales and gross margin for Wholesale were $45.8 million, or 78.8% of sales, and $12.4 million, or 21.2% of sales, respectively, during the 26 weeks ended October 29, 2022. The cost of sales and gross margin for Wholesale was $50.1 million or 75.8% of sales and $16.0 million or 24.2% of sales, respectively, during the 26 weeks ended October 30, 2021. The gross margin rate decreased during the 26 weeks ended October 29, 2022 primarily due to higher markdowns.

DSS

The gross margin for the DSS segment was $6.7 million, or 79.1% of sales, during the 13 weeks ended October 29, 2022 and $6.9 million, or 83.4% of sales, during the 13 weeks ended October 30, 2021. The gross margin for the DSS segment was $14.2 million, or 80.3% of sales, during the 26 weeks ended October 29, 2022 and $13.9 million, or 84.0% of sales, during the 26 weeks ended October 30, 2021. The high gross margins are driven primarily by high margin subscription service revenue earned.

Intercompany Eliminations

During the 13 weeks ended October 29, 2022 and October 30, 2021, our sales eliminations were $(11.1) million and $(11.9) million, respectively. During the 26 weeks ended October 29, 2022 and October 30, 2021, our sales eliminations were $(30.0) million and $(34.4) million, respectively. These sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

During the 13 weeks ended October 29, 2022 and October 30, 2021, the cost of sales eliminations were $(14.3) million and $(16.1) million, respectively. During the 26 weeks ended October 29, 2022 and October 30, 2021, the cost of sales eliminations were $(28.3) million and $(33.0) million, respectively. These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

During the 13 weeks ended October 29, 2022 and October 30, 2021, the gross margin eliminations were $3.2 million and $4.2 million, respectively. During the 26 weeks ended October 29, 2022 and October 30, 2021, the gross margin eliminations were $(1.7) million and $(1.3) million, respectively. The gross margin eliminations reflect the net impact of the sales eliminations and cost of sales eliminations during the above mentioned reporting periods.

Selling and Administrative Expenses

	13 weeks ended						26 weeks ended
Dollars in thousands	October 29, 2022		% of Sales	October 30, 2021		% of Sales	October 29, 2022		% of Sales	October 30, 2021		% of Sales
Total Selling and Administrative Expenses	$	107,086	17.4%	$	107,902	17.2%	$	205,572	23.3%	$	194,137	22.4%

During the 13 weeks ended October 29, 2022, selling and administrative expenses decreased by $0.8 million, or 0.8%, to $107.1 million from $107.9 million during the 13 weeks ended October 30, 2021. During the 26 weeks ended October 29, 2022, selling and administrative expenses increased by $11.4 million, or 5.9%, to $205.6 million from $194.1 million during the 26 weeks ended October 30, 2021. The variances by segment are discussed by segment below.

Retail

During the 13 weeks ended October 29, 2022, Retail selling and administrative expenses increased by $0.6 million, or 0.7%, to $90.1 million from $89.5 million during the 13 weeks ended October 30, 2021. This increase was primarily due to a $3.2 million increase in store payroll and operating costs primarily at new/closed stores and a $3.3 million increase in corporate payroll, infrastructure and product development costs, partially offset by a $5.9 million decrease in incentive plan compensation expense, including compensation expense related to phantom share awards.

35

During the 26 weeks ended October 29, 2022, Retail selling and administrative expenses increased by $11.2 million, or 7.1%, to $169.1 million from $157.9 million during the 26 weeks ended October 30, 2021. This increase was primarily due to a $9.6 million increase in store payroll and operating costs primarily at new/closed stores and a $7.9 million increase in corporate payroll, infrastructure and product development costs, partially offset by a $6.3 million decrease in incentive plan compensation expense, including compensation expense related to phantom share awards.

The payroll increase is primarily related to increased staffing at stores that had temporarily or partially closed due to limited on campus activities related to the COVID-19 pandemic in the prior year. The increase is also due to greater on campus activity and related sales during the 26 weeks ended October 29, 2022 and costs to support the growth in First Day programs.

Wholesale

Wholesale selling and administrative expenses decreased by $0.5 million, or 11.8%, to $3.9 million from $4.4 million during the 13 weeks ended October 30, 2021. Wholesale selling and administrative expenses decreased by $0.4 million, or 4.5%, to $8.0 million from $8.4 million during the 26 weeks ended October 30, 2021. For the 13 and 26 week periods, the decreases were primarily driven by lower compensation expense, including incentive plan compensation expense of $0.2 million and $0.3 million, respectively, partially offset by higher operating costs.

DSS

During the 13 weeks ended October 29, 2022, DSS selling and administrative expenses increased by $0.8 million, or 11.3%, to $8.1 million from $7.3 million during the 13 weeks ended October 30, 2021. The increase in costs was primarily driven by an increase of $1.1 million in operating costs invested in the business associated with product development, sales and infrastructure costs aimed at increasing revenue, and an increase of $1.0 million in compensation expense, partially offset by lower incentive plan compensation expense of $1.3 million.

During the 26 weeks ended October 29, 2022, DSS selling and administrative expenses increased by $2.5 million, or 18.4%, to $16.3 million from $13.8 million during the 26 weeks ended October 30, 2021. The increase in costs was primarily driven by an increase of $2.3 million in compensation expense and an increase of $1.4 million in operating costs invested in the business associated with product development, sales and infrastructure costs aimed at increasing revenue, partially offset by lower incentive plan compensation expense of $1.2 million.

DSS has begun to adjust its cost structure, particularly within its Bartleby organization, to focus on enhanced profitability and sustainable growth.

Corporate Services

During the 13 weeks ended October 29, 2022, Corporate Services' selling and administrative expenses decreased by $1.7 million, or 25.5%, to $5.1 million from $6.8 million during the 13 weeks ended October 30, 2021. During the 26 weeks ended October 29, 2022, Corporate Services' selling and administrative expenses decreased by $2.0 million, or 13.8%, to $12.3 million from $14.3 million during the 26 weeks ended October 30, 2021. The decrease in costs was primarily due to lower incentive plan compensation costs, including incentive plan compensation expense related to phantom share awards.

Depreciation and Amortization Expense

	13 weeks ended						26 weeks ended
Dollars in thousands	October 29, 2022		% of Sales	October 30, 2021		% of Sales	October 29, 2022		% of Sales	October 30, 2021		% of Sales
Total Depreciation and Amortization Expense	$	10,759	1.7%	$	11,952	1.9%	$	23,292	2.6%	$	24,576	2.8%

Depreciation and amortization expense decreased by $1.2 million, or 10.0%, to $10.8 million during the 13 weeks ended October 29, 2022 from $12.0 million during the 13 weeks ended October 30, 2021. Depreciation and amortization expense decreased by $1.3 million, or 5.2%, to $23.3 million during the 26 weeks ended October 29, 2022 from $24.6 million during the 26 weeks ended October 30, 2021. The decrease was primarily attributable to lower depreciable assets and intangibles due to the store impairment loss recognized during Fiscal 2022.

Restructuring and other charges

During the 13 and 26 weeks ended October 29, 2022, we recognized restructuring and other charges totaling $0.3 million and $0.6 million, respectively, comprised primarily of professional service costs for restructuring and process improvements.

During the 13 and 26 weeks ended October 30, 2021, we recognized restructuring and other charges totaling $1.1 million and $3.0 million, respectively, comprised primarily of $0.4 million and $1.3 million, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, and $0.7 million and $1.7 million, respectively, for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

36

Operating Income (Loss)

	13 weeks ended						26 weeks ended
Dollars in thousands	October 29, 2022		% of Sales	October 30, 2021		% of Sales	October 29, 2022		% of Sales	October 30, 2021		% of Sales
Total Operating Income (Loss)	$	26,730	4.4%	$	24,589	3.9%	$	(21,176)	(2.4)%	$	(16,146)	(1.8)%

Our operating income was $26.7 million during the 13 weeks ended October 29, 2022, compared to operating income of $24.6 million during the 13 weeks ended October 30, 2021. The increase in operating income is due to the matters discussed above. For the 13 weeks ended October 29, 2022, excluding the $0.3 million of restructuring and other charges, discussed above, operating income was $27.0 million (or 4.4% of sales). For the 13 weeks ended October 30, 2021, excluding the $1.1 million of restructuring and other charges, discussed above, operating income was $25.7 million (or 4.1% of sales).

Our operating loss was $(21.2) million during the 26 weeks ended October 29, 2022, compared to operating loss of $(16.1) million during the 26 weeks ended October 30, 2021. The increase in operating loss is due to the matters discussed above. For the 26 weeks ended October 29, 2022, excluding the $0.6 million of restructuring and other charges, discussed above, operating loss was $(20.5) million (or (2.3)% of sales). For the 26 weeks ended October 30, 2021, excluding the $0.4 million of merchandise inventory loss and the $3.0 million of restructuring and other charges, discussed above, operating loss was $(12.7) million (or (1.5)% of sales).

Interest Expense, Net

	13 weeks ended				26 weeks ended
Dollars in thousands	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Interest Expense, Net	$	4,886	$	2,264	$	8,754	$	4,758

Net interest expense increased by $2.6 million to $4.9 million during the 13 weeks ended October 29, 2022 from $2.3 million during the 13 weeks ended October 30, 2021. Net interest expense increased by $4.0 million to $8.8 million during the 26 weeks ended October 29, 2022 from $4.8 million during the 26 weeks ended October 30, 2021. The increase was primarily due to higher borrowings and higher interest rates compared to the prior year.

Income Tax (Benefit) Expense

	13 weeks ended						26 weeks ended
Dollars in thousands	October 29, 2022		Effective Rate	October 30, 2021		Effective Rate	October 29, 2022		Effective Rate	October 30, 2021		Effective Rate
Income Tax Expense (Benefit)	$	(300)	(1.4)%	$	(203)	(0.9)%	$	633	(2.1)%	$	196	(0.9)%

We recorded an income tax benefit of $(0.3) million on pre-tax income of $21.8 million during the 13 weeks ended October 29, 2022, which represented an effective income tax rate of (1.4)% and we recorded an income tax benefit of $(0.2) million on a pre-tax income of $22.3 million during the 13 weeks ended October 30, 2021, which represented an effective income tax rate of (0.9)%.

We recorded an income tax expense of $0.6 million on pre-tax loss of $(29.9) million during the 26 weeks ended October 29, 2022, which represented an effective income tax rate of (2.1)% and we recorded an income tax expense of $0.2 million on a pre-tax loss of $(20.9) million during the 26 weeks ended October 30, 2021, which represented an effective income tax rate of (0.9)%.

The effective tax rate for the 13 and 26 weeks ended October 29, 2022 is lower as compared to the prior year comparable period due to foreign taxes and lower projected annual taxable loss in the current year.

Net Income (Loss)

	13 weeks ended				26 weeks ended
Dollars in thousands	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net income (loss)	$	22,144	$	22,528	$	(30,563)	$	(21,100)

As a result of the factors discussed above, net income was $22.1 million during the 13 weeks ended October 29, 2022, compared with net income of $22.5 million during the 13 weeks ended October 30, 2021. As a result of the factors discussed

37

above, net loss was $(30.6) million during the 26 weeks ended October 29, 2022, compared with net loss of $(21.1) million during the 26 weeks ended October 30, 2021.

Adjusted Earnings (non-GAAP) is $24.0 million during the 13 weeks ended October 29, 2022, compared with $25.0 million during the 13 weeks ended October 30, 2021. Adjusted Earnings (non-GAAP) is $(26.7) million during the 26 weeks ended October 29, 2022, compared with $(15.1) million during the 26 weeks ended October 30, 2021. See Adjusted Earnings (non-GAAP) discussion below.

Use of Non-GAAP Measures - Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash Flow

To supplement our results prepared in accordance with generally accepted accounting principles (“GAAP”), we use the measure of Adjusted Earnings, Adjusted EBITDA, Adjusted EBITDA by Segment, and Free Cash Flow, which are non-GAAP financial measures under Securities and Exchange Commission (the “SEC”) regulations. We define Adjusted Earnings as net income adjusted for certain reconciling items that are subtracted from or added to net income (loss). We define Adjusted EBITDA as net income (loss) plus (1) depreciation and amortization; (2) interest expense and (3) income taxes, (4) as adjusted for items that are subtracted from or added to net income (loss). We define Free Cash Flow as Cash Flows from Operating Activities less capital expenditures, cash interest and cash taxes.

To properly and prudently evaluate our business, we encourage you to review our condensed consolidated financial statements included elsewhere in this Form 10-Q, the reconciliation of Adjusted Earnings to net income (loss), the reconciliation of consolidated Adjusted EBITDA to consolidated net income (loss), and the reconciliation of Adjusted EBITDA by Segment to net income (loss) by segment, the most directly comparable financial measure presented in accordance with GAAP, set forth in the tables below. All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance.

These non-GAAP financial measures are not intended as substitutes for and should not be considered superior to measures of financial performance prepared in accordance with GAAP. In addition, our use of these non-GAAP financial measures may be different from similarly named measures used by other companies, limiting their usefulness for comparison purposes.

We review these non-GAAP financial measures as internal measures to evaluate our performance at a consolidated level and at a segment level and manage our operations. We believe that these measures are useful performance measures which are used by us to facilitate a comparison of our on-going operating performance on a consistent basis from period-to-period. We believe that these non-GAAP financial measures provide for a more complete understanding of factors and trends affecting our business than measures under GAAP can provide alone, as they exclude certain items that management believes do not reflect the ordinary performance of our operations in a particular period. Our Board of Directors and management also use Adjusted EBITDA and Adjusted EBITDA by Segment, at a consolidated and at a segment level, as one of the primary methods for planning and forecasting expected performance, for evaluating on a quarterly and annual basis actual results against such expectations, and as a measure for performance incentive plans. Management also uses Adjusted EBITDA by Segment to determine segment capital allocations. We believe that the inclusion of Adjusted Earnings, Adjusted EBITDA, and Adjusted EBITDA by Segment results provides investors useful and important information regarding our operating results, in a manner that is consistent with management's evaluation of business performance. We believe that Free Cash Flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements and assists investors in their understanding of our operating profitability and liquidity as we manage the business to maximize margin and cash flow.

38

Consolidated Adjusted Earnings (non-GAAP)

	13 weeks ended				26 weeks ended
Dollars in thousands	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net income (loss)	$	22,144	$	22,528	$	(30,563)	$	(21,100)
Reconciling items, after-tax (below)	1,878		2,427		3,830		6,041
Adjusted Earnings (non-GAAP)	$	24,022	$	24,955	$	(26,733)	$	(15,059)
Reconciling items, pre-tax
Merchandise inventory loss (a)	$	—	$	—	—		434
Content amortization (non-cash)	1,618		1,311		3,195		2,586
Restructuring and other charges (a)	260		1,116		635		3,021
Reconciling items, pre-tax	1,878		2,427		3,830		6,041
Less: Pro forma income tax impact (a)(b)	—		—		—		—
Reconciling items, after-tax	$	1,878	$	2,427	$	3,830	$	6,041

(a)     See Management Discussion and Analysis and Results of Operations discussion above.

(b)    Represents the income tax effects of the non-GAAP items.

Consolidated Adjusted EBITDA (non-GAAP)

	13 weeks ended				26 weeks ended
Dollars in thousands	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net income (loss)	$	22,144	$	22,528	$	(30,563)	$	(21,100)
Add:
Depreciation and amortization expense	10,759		11,952		23,292		24,576
Interest expense, net	4,886		2,264		8,754		4,758
Income tax (benefit) expense	(300)		(203)		633		196
Merchandise inventory loss (a)	—		—		—		434
Content amortization (non-cash)	1,618		1,311		3,195		2,586
Restructuring and other charges (a)	260		1,116		635		3,021
Adjusted EBITDA (non-GAAP)	$	39,367	$	38,968	$	5,946	$	14,471

(a)     See Management Discussion and Analysis and Results of Operations discussion above.

The following is Adjusted EBITDA by segment for the 13 and 26 weeks ended October 29, 2022 and October 30, 2021.

Adjusted EBITDA - by Segment	13 weeks ended October 29, 2022
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total
Net income (loss)	$	30,547	$	218	$	(1,941)	$	(9,938)	$	3,258	$	22,144
Add:
Depreciation and amortization expense	8,869		1,370		503		17		—		10,759
Interest expense, net	—		—		—		4,886		—		4,886
Income tax benefit	—		—		—		(300)		—		(300)
Content amortization (non-cash)	—		—		1,618		—		—		1,618
Restructuring and other charges (b)	—		—		—		260		—		260
Adjusted EBITDA (non-GAAP)	$	39,416	$	1,588	$	180	$	(5,075)	$	3,258	$	39,367

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Adjusted EBITDA - by Segment	13 weeks ended October 30, 2021
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total
Net income (loss)	$	29,595	$	(131)	$	(2,301)	$	(8,928)	$	4,293	$	22,528
Add:
Depreciation and amortization expense	8,669		1,364		1,902		17		—		11,952
Interest expense, net	—		—		—		2,264		—		2,264
Income tax benefit	—		—		—		(203)		—		(203)
Content amortization (non-cash)	105		—		1,206		—		—		1,311
Restructuring and other charges (b)	1,075		—		—		41		—		1,116
Adjusted EBITDA (non-GAAP)	$	39,444	$	1,233	$	807	$	(6,809)	$	4,293	$	38,968

Adjusted EBITDA - by Segment	26 weeks ended October 29, 2022
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total
Net (loss) income	$	(3,993)	$	1,637	$	(4,240)	$	(22,346)	$	(1,621)	$	(30,563)
Add:
Depreciation and amortization expense	18,398		2,719		2,140		35		—		23,292
Interest expense, net	—		—		—		8,754		—		8,754
Income tax expense	—		—		—		633		—		633
Content amortization (non-cash)	26		—		3,169		—		—		3,195
Restructuring and other charges (b)	—		—		—		635		—		635
Adjusted EBITDA (non-GAAP)	$	14,431	$	4,356	$	1,069	$	(12,289)	$	(1,621)	$	5,946

Adjusted EBITDA - by Segment	26 weeks ended October 30, 2021
Dollars in thousands	Retail		Wholesale		DSS		Corporate Services(a)		Eliminations		Total
Net (loss) income	$	(1,042)	$	4,983	$	(3,617)	$	(20,180)	$	(1,244)	$	(21,100)
Add:
Depreciation and amortization expense	18,076		2,664		3,801		35		—		24,576
Interest expense, net	—		—		—		4,758		—		4,758
Income tax expense	—		—		—		196		—		196
Merchandise inventory loss (b)	434		—		—		—		—		434
Content amortization (non-cash)	271		—		2,315		—		—		2,586
Restructuring and other charges (b)	2,083		—		—		938		—		3,021
Adjusted EBITDA (non-GAAP)	$	19,822	$	7,647	$	2,499	$	(14,253)	$	(1,244)	$	14,471

(a) Interest expense is reflected in Corporate Services as it is primarily related to our Credit Agreement and Term Loan Agreement which fund our operating and financing needs across the organization. Income taxes are reflected in Corporate Services as we record our income tax provision on a consolidated basis.

(b)    See Management Discussion and Analysis and Results of Operations discussion above.

40

Free Cash Flow (non-GAAP)

	13 weeks ended				26 weeks ended
Dollars in thousands	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net cash flows provided by operating activities	$	38,374	$	41,580	$	9,376	$	24,276
Less:
Capital expenditures (a)	10,847		9,894		20,573		21,264
Cash interest	4,368		1,980		7,301		3,662
Cash taxes	(15,705)		(8,032)		(15,583)		(7,778)
Free Cash Flow (non-GAAP)	$	38,864	$	37,738	$	(2,915)	$	7,128

(a) Purchases of property and equipment are also referred to as capital expenditures. Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, digital initiatives and enhancements to internal systems and our website.

The following table provides the components of total purchases of property and equipment:

Capital Expenditures	13 weeks ended				26 weeks ended
Dollars in thousands	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Physical store capital expenditures	$	6,052	$	3,587	$	10,548	$	7,480
Product and system development	2,947		3,856		5,612		7,480
Content development costs	1,294		1,865		3,313		4,712
Other	554		586		1,100		1,592
Total Capital Expenditures	$	10,847	$	9,894	$	20,573	$	21,264

Liquidity and Capital Resources

Our primary sources of cash are net cash flows from operating activities, funds available under our credit agreement and short-term vendor financing. As of October 29, 2022, we had $222.0 million and $30.0 million outstanding borrowings under the Credit Agreement and Term Loan Agreement, respectively. See Financing Arrangements discussion below.

We believe that our future cash from operations, access to borrowings under the Credit Agreement and Term Loan Agreement will provide adequate resources to fund our operating and financing needs for the foreseeable future. Our future capital requirements will depend on many factors, including, but not limited to, the economy and the outlook for and pace of sustainable growth in our markets, the levels at which we maintain inventory, the number and timing of new store openings, and any potential acquisitions of other brands or companies including digital properties. To the extent that available funds are insufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity. Our access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy. There can be no assurances that we will have access to capital markets on acceptable terms.

COVID-19 Business Impact

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities. Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years. We cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations. Although most four year schools returned to a traditional on-campus environment for learning, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

We will continue to assess our operations and will continue to consider the guidance of local governments and our campus partners to determine how to operate our bookstores in the safest manner for our employees and customers. If economic conditions caused by the pandemic do not recover as currently estimated by management or market factors currently in place change, there could be a further impact on our results of operations, financial condition and cash flows from operations.

41

Sources and Uses of Cash Flow

	26 weeks ended
Dollars in thousands	October 29, 2022		October 30, 2021
Cash, cash equivalents, and restricted cash at beginning of period	$	21,934	$	16,814
Net cash flows provided by operating activities	9,376		24,276
Net cash flows used in investing activities	(20,318)		(20,938)
Net cash flows provided by financing activities	23,727		3,378
Cash, cash equivalents, and restricted cash at end of period	$	34,719	$	23,530

As of October 29, 2022 and October 30, 2021, we had restricted cash of $15.6 million and $12.5 million, respectively, comprised of $14.7 million and $11.6 million, respectively, in prepaid and other current assets in the consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement and $0.9 million for both periods in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Cash Flow from Operating Activities

Our business is highly seasonal. For our retail operations, cash flows from operating activities are typically a source of cash in the second and third fiscal quarters, when students generally purchase and rent textbooks and other course materials for the upcoming semesters based on the typical academic semester. When a school adopts our First Day inclusive and equitable access offerings, cash collection from the school generally occurs after the student drop/add dates, which is later in the working capital cycle, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of our sales shift to First Day inclusive and equitable access offerings, we are focused on efforts to better align the timing of our cash outflows to course material vendors with cash inflows collected from schools. For our wholesale operations, cash flows from operating activities are typically a source of cash in the second and fourth fiscal quarters, as payments are received from the summer and winter selling season when they sell textbooks and other course materials for retail distribution. For both retail and wholesale, cash flows from operating activities are typically a use of cash in the fourth fiscal quarter, when sales volumes are materially lower than the other quarters. For our DSS segment, cash flows are not seasonal as cash flows from operating activities are typically consistent throughout the year. Our quarterly cash flows also may fluctuate depending on the timing of the start of the various school’s semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods.

Cash flows provided by operating activities during the 26 weeks ended October 29, 2022 were $9.4 million compared to $24.3 million during the 26 weeks ended October 30, 2021. This decrease in cash flows provided by operating activities of $14.9 million was primarily due to changes in working capital, including higher inventory purchases, partially offset by lower receivables and lower earnings in the current year period compared to the prior year period.

Cash Flow from Investing Activities

Cash flows used in investing activities during the 26 weeks ended October 29, 2022 were $(20.3) million compared to $(20.9) million during the 26 weeks ended October 30, 2021. The decrease in cash used in investing activities is primarily due to lower capital expenditures and contractual capital investments associated with content development, digital initiatives, enhancements to internal systems and websites, and new store construction. Capital expenditures totaled $20.6 million and $21.3 million during the 26 weeks ended October 29, 2022 and October 30, 2021, respectively.

Cash Flow from Financing Activities

Cash flows provided by financing activities during the 26 weeks ended October 29, 2022 were $23.7 million compared to $3.4 million during the 26 weeks ended October 30, 2021. This net change of $20.3 million is primarily due to higher net borrowings.

Financing Arrangements

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended March 31, 2021 and March 1, 2019, under which the lenders committed to provide us with a 5-year asset-backed revolving credit facility in an aggregate committed principal amount of $400 million (the “Credit Facility”) effective from the March 1, 2019 amendment. We have the option to request an increase in commitments under the Credit Facility of up to $100 million, subject to certain restrictions. Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs. The agreement includes an

42

incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100 million incremental facility maintaining the maximum availability under the Credit Agreement at $500 million. As of October 29, 2022, we were in compliance with all debt covenants under the Credit Agreement.

On March 4, 2022, we were granted a waiver to the condition to the draw scheduled for April 2022 under the FILO Facility, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $110.0 million. Under the waiver amendment, the commitment under the FILO Facility of $25.0 million was increased to $40.0 million, with all remaining terms unchanged.

During the 26 weeks ended October 29, 2022, we borrowed $318.2 million and repaid $321.9 million under the Credit Agreement, with $222.0 million of outstanding borrowings as of October 29, 2022, comprised entirely of borrowings under the Credit Facility. During the 26 weeks ended October 30, 2021, we borrowed $259.7 million and repaid $254.0 million under the Credit Agreement, with $183.3 million of outstanding borrowings as of October 30, 2021, comprised entirely of borrowings under the Credit Facility. As of both October 29, 2022 and October 30, 2021, we have issued $4.8 million in letters of credit under the Credit Facility.

For additional information including interest terms and covenant requirements related to the Credit Facility and FILO Facility, refer to Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Term Loan

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to our existing Credit Agreement. For additional information, see the Company’s Report on Form 8-K dated June 7, 2022 and filed with the SEC on June 10, 2022.

The Term Loan Credit Agreement provides for term loans in an amount equal to $30.0 million (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”). The proceeds of the Term Loans are being used to finance working capital, and to pay fees and expenses related to the Term Loan Facility. During the 26 weeks ended October 29, 2022, we borrowed $30.0 million and repaid $0 under the Term Loan Credit Agreement, with $30.0 million of outstanding borrowings as of October 29, 2022.

We incurred debt issuance costs totaling $2.0 million related to the Term Loan Credit Agreement. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the Term Loan Facility.

The Term Loans accrue interest at a rate equal to 11.25%, payable quarterly, and mature on June 7, 2024. We have the right, through December 31, 2022, to pay all or a portion of the interest on the Term Loans in kind. To date, all interest on the term loan has been paid in cash. The Term Loans do not amortize prior to maturity. Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we must pay a fee of 1.5% of the outstanding principal amount of the Term Loans on such date.

The Term Loans are required to be repaid (i) after repayment of the FILO Facility under the Credit Agreement, with up to 100% of the proceeds of the sale of a non-core business line of the Company generating net proceeds in excess of $1.0 million, other than ordinary course dispositions and (ii) in full in connection with a debt or equity financing transaction generating net proceeds in excess of an amount sufficient to repay the FILO Facility under the Credit Agreement.

The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions. The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

The Credit Agreement amendment permitted us to incur the Term Loan Facility and also provides that, upon repayment of the Term Loan Credit Agreement (and, if applicable, any replacement credit facility thereof), we may incur second lien secured debt in an aggregate principal amount not to exceed $75.0 million.

Income Tax Implications on Liquidity

For the fiscal year ended April 30, 2022, we filed an application to change our tax year from January to April under the automatic consent provisions. As a result of the tax year-end change, there is no longer a long-term tax payable associated with the LIFO reserve in other long-term liabilities.

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We have filed our federal income tax returns for the tax year ended January 2021, which included claims for $33.6 million in refunds for cash taxes paid in prior years. We received refunds of $7.8 million in Fiscal 2022 and $15.8 million on August 29, 2022 (Fiscal 2023). We expect to receive additional refunds of approximately $10.0 million.

Share Repurchases

During the 26 weeks ended October 29, 2022, we did not repurchase any of our Common Stock under the stock repurchase program. As of October 29, 2022, approximately $26.7 million remains available under the stock repurchase program.

During the 26 weeks ended October 29, 2022, we repurchased 344,587 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Contractual Obligations

Our projected contractual obligations are consistent with amounts disclosed in Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Off-Balance Sheet Arrangements

As of October 29, 2022, we have no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

Critical Accounting Policies

Our policies regarding the use of estimates and other critical accounting policies are consistent with the disclosures in Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Disclosure Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and information relating to us and our business that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this communication, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and similar expressions, as they relate to us or our management, identify forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, among others:

•risks associated with public health crises, epidemics, and pandemics, such as the COVID-19 pandemic, including the duration, spread, severity, and any recurrences thereof, and the impact such public health crises have on the overall demand for BNED products and services, our operations, the operations of our suppliers and other business partners, and the effectiveness of our response to these risks;

•general competitive conditions, including actions our competitors and content providers may take to grow their businesses;

•a decline in college enrollment or decreased funding available for students;

•decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the operation of their bookstores;

•implementation of our digital strategy may not result in the expected growth in our digital sales and/or profitability;

•risk that digital sales growth does not exceed the rate of investment spend;

•the performance of our online, digital and other initiatives, integration of and deployment of, additional products and services including new digital channels, and enhancements to higher education digital products;

•the inability to achieve the expected cost savings during the anticipated time frame, and the inability to implement our cost saving initiatives in a timely and efficient manner;

•the risk of price reduction or change in format of course materials by publishers, which could negatively impact revenues and margin;

•the general economic environment and consumer spending patterns;

44

•decreased consumer demand for our products, low growth or declining sales;

•the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various acquisitions, may not be fully realized or may take longer than expected;

•the integration of the operations of various acquisitions into our own may also increase the risk of our internal controls being found ineffective;

•changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers;

•our ability to successfully implement our strategic initiatives including our ability to identify, compete for and execute upon additional acquisitions and strategic investments;

•risks associated with operation or performance of MBS Textbook Exchange, LLC’s point-of-sales systems that are sold to college bookstore customers;

•technological changes;

•risks associated with counterfeit and piracy of digital and print materials;

•our international operations could result in additional risks;

•our ability to attract and retain employees;

•risks associated with data privacy, information security and intellectual property;

•trends and challenges to our business and in the locations in which we have stores;

•non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings;

•disruptions to our information technology systems, infrastructure and data due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations;

•disruption of or interference with third party web service providers and our own proprietary technology;

•work stoppages or increases in labor costs;

•possible increases in shipping rates or interruptions in shipping service;

•product shortages, including decreases in the used textbook inventory supply associated with the implementation of publishers’ digital offerings and direct to student textbook consignment rental programs, as well as the risks associated with the impacts that public health crises may have on the ability of our suppliers to manufacture or source products, particularly from outside of the United States;

•changes in domestic and international laws or regulations, including U.S. tax reform, changes in tax rates, laws and regulations, as well as related guidance;

•enactment of laws or changes in enforcement practices which may restrict or prohibit our use of texts, emails, interest based online advertising, recurring billing or similar marketing and sales activities;

•the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing;

•our ability to satisfy future capital and liquidity requirements;

•our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms;

•adverse results from litigation, governmental investigations, tax-related proceedings, or audits;

•changes in accounting standards; and

•the other risks and uncertainties detailed in the section titled “Risk Factors” in Part I - Item 1A in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Form 10-Q. 

Item 3:    Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the items discussed in Part II - Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

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Item 4:    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation (as required under Rules 13a-15(b) and 15d-15(b) under the Exchange Act) was performed under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

As disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022, management concluded that a material weakness existed at April 30, 2022 due to an operating deficiency resulting from insufficient precision applied in the execution of management’s review of the analysis of its deferred tax asset valuation allowance. The Company is in the process of implementing its remediation plan, which will occur in the fourth quarter of Fiscal 2023, due to the annual nature of the control. Based on management’s evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective at the reasonable assurance level.

Management has not identified any changes in the Company’s internal control over financial reporting that occurred during the second quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

We are involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of our business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, personal injuries and other matters. We record a liability when we believe that it is both probable that a loss has been incurred and the amount of loss can be reasonably estimated. Based on our current knowledge, we do not believe that there is a reasonable possibility that the final outcome of any pending or threatened legal proceedings to which we or any of our subsidiaries are a party, either individually or in the aggregate, will have a material adverse effect on our future financial results. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters will not materially and adversely affect our business, financial condition, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes during the 26 weeks ended October 29, 2022 to the risk factors discussed in Part I - Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information as of October 29, 2022 with respect to shares of Common Stock we purchased during the first quarter of Fiscal 2023:

Period	Total Number of Shares Purchased	Average Price Paid per Share (a)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
July 31, 2022 - August 27, 2022	—	$	—	—	$	26,669,324
August 28, 2022 - October 1, 2022	—	$	—	—	$	26,669,324
October 1, 2022 - October 29, 2022	—	$	—	—	$	26,669,324
	—	$	—	—

(a)     This amount represents the average price paid per common share. This price includes a per share commission paid for all repurchases.

During the 26 weeks ended October 29, 2022, we did not repurchase any shares of our Common Stock under the stock repurchase program.

During the 26 weeks ended October 29, 2022, we repurchased 344,587 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Item 5. Other Information

None

Item 6.    Exhibits

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31.1	Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

48

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BARNES & NOBLE EDUCATION, INC.
(Registrant)
By:	/S/ THOMAS D. DONOHUE
	Thomas D. Donohue
	Chief Financial Officer
	(principal financial officer)
By:	/S/ SEEMA C. PAUL
	Seema C. Paul
	Chief Accounting Officer
	(principal accounting officer)

December 6, 2022

49

EX-31.1

Exhibit 31.1

CERTIFICATION BY THE

CHIEF EXECUTIVE OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael P. Huseby, certify that:

1.I have reviewed this report on Form 10-Q for the quarterly period ended October 29, 2022 of Barnes & Noble Education, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 6, 2022

By:	/s/ Michael P. Huseby
	Michael P. Huseby
	Chief Executive Officer
	Barnes & Noble Education, Inc.

EX-31.2

Exhibit 31.2

CERTIFICATION BY THE

CHIEF FINANCIAL OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas D. Donohue, certify that:

1.I have reviewed this report on Form 10-Q for the quarterly period ended October 29, 2022 of Barnes & Noble Education, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 6, 2022

By:	/s/ Thomas D. Donohue
	Thomas D. Donohue
	Chief Financial Officer
	Barnes & Noble Education, Inc.

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Barnes & Noble Education, Inc. (the “Company”) on Form 10-Q for the period ended October 29, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael P. Huseby, Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael P. Huseby

Michael P. Huseby

Chief Executive Officer
Barnes & Noble Education, Inc.

December 6, 2022

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Barnes & Noble Education, Inc. (the “Company”) on Form 10-Q for the period ended October 29, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas D. Donohue, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Thomas D. Donohue

Thomas D. Donohue

Chief Financial Officer
Barnes & Noble Education, Inc.

December 6, 2022

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Document and Entity Information - shares	6 Months Ended
	Oct. 29, 2022	Nov. 25, 2022
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Entity Shell Company	false
Entity Registrant Name	BARNES & NOBLE EDUCATION, INC.
Entity Central Index Key	0001634117
Current Fiscal Year End Date	--04-29
Entity Filer Category	Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		52,598,798
Document Quarterly Report	true
Trading Symbol	BNED
Security Exchange Name	NYSE
Title of 12(b) Security	Common Stock, $0.01 par value per share
Document Transition Report	false
Entity File Number	1-37499
Local Phone Number	991-2665
City Area Code	(908)
Entity Address, Postal Zip Code	07920
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-0599018
Entity Address, State or Province	NJ
Entity Address, City or Town	Basking Ridge,
Entity Address, Address Line One	120 Mountain View Blvd.,
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Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 29, 2022	Oct. 30, 2021	Oct. 29, 2022	Oct. 30, 2021
Sales:
Product sales and other	$ 575,764	$ 577,329	$ 828,710	$ 805,099
Total sales	617,098	626,977	880,956	867,771
bned_Cost of Product and Other Cost of Sales	449,322	453,070	643,427	627,231
Rental cost of sales	22,941	28,348	29,206	34,952
Cost of Goods and Services Sold	472,263	481,418	672,633	662,183
Gross profit	144,835	145,559	208,323	205,588
Selling and administrative expenses	107,086	107,902	205,572	194,137
Depreciation and amortization expense	10,759	11,952	23,292	24,576
Restructuring and other charges	260	1,116	635	3,021
Operating (loss) income	26,730	24,589	(21,176)	(16,146)
Interest expense, net	4,886	2,264	8,754	4,758
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	21,844	22,325	(29,930)	(20,904)
Income tax expense (benefit)	(300)	(203)	633	196
Net (loss) income	$ 22,144	$ 22,528	$ (30,563)	$ (21,100)
(Loss) Earnings per share of common stock
Basic	$ 0.42	$ 0.43	$ (0.58)	$ (0.41)
Diluted	$ 0.42	$ 0.41	$ (0.58)	$ (0.41)
Weighted average common shares outstanding
Diluted	53,195	54,568	52,305	51,570
Basic	52,438	51,666	52,305	51,570

XML

Consolidated Balance Sheets - USD ($) shares in Thousands, $ in Thousands	Oct. 29, 2022	Apr. 30, 2022	Oct. 30, 2021
Current assets:
Cash and cash equivalents	$ 19,129	$ 10,388	$ 10,996
Receivables, net	210,009	137,039	218,053
Merchandise inventories, net	371,570	293,854	370,529
Textbook rental inventories	49,355	29,612	50,642
Prepaid expenses and other current assets	54,924	61,709	68,965
Total current assets	704,987	532,602	719,185
Net property and equipment	96,096	94,072	91,875
Operating Lease, Right-of-Use Asset	291,704	286,584	252,650
Intangible assets, net	121,487	129,624	141,847
Goodwill	4,700	4,700	4,700
Deferred Tax Assets, Tax Deferred Expense	0	0	15,943
Other noncurrent assets	20,980	23,971	26,010
Total assets	1,239,954	1,071,553	1,252,210
Current liabilities:
Accounts payable	326,168	182,790	333,099
Accrued liabilities	118,689	95,387	122,734
Operating Lease, Liability, Current	130,802	97,143	118,434
Short-term Debt	0	40,000	0
Total current liabilities	575,659	415,320	574,267
Deferred Income Tax Liabilities, Net	1,430	1,430	0
Operating Lease, Liability, Noncurrent	190,758	219,594	171,341
Other long-term liabilities	19,643	21,135	51,113
Long-Term Debt	252,000	185,700	183,300
Liabilities	1,039,490	843,179	980,021
Commitments and contingencies	0	0	0
Preferred Stock, Value, Issued	0	0	0
Common Stock, Value, Outstanding	551	542	541
Additional Paid in Capital	744,339	740,838	736,886
Retained Earnings (Accumulated Deficit)	(522,057)	(491,494)	(443,737)
Treasury Stock, Value	(22,369)	(21,512)	(21,501)
Total Equity	200,464	228,374	272,189
Total liabilities and Parent Company equity	$ 1,239,954	$ 1,071,553	$ 1,252,210
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	5,000	5,000	5,000
Preferred Stock, Shares Issued	0	0	0
Preferred Stock, Shares Outstanding	0	0	0
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01	$ 0.01
Common Stock, Shares Authorized	200,000	200,000	200,000
Common Stock, Shares, Issued	55,132	54,234	54,162
Common Stock, Shares, Outstanding	52,599	52,046	51,976

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Oct. 29, 2022	Oct. 30, 2021
Net Income (Loss) Attributable to Parent	$ (30,563)	$ (21,100)
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization expense	23,292	24,576
Content Amortization	3,195	2,586
Amortization of Debt Issuance Costs	1,200	725
COGS Inventory Loss and Markdown	0	434
Share-based Compensation	3,510	2,600
Increase (Decrease) in Other Noncurrent Assets and Liabilities, Net	319	1,596
Increase (Decrease) in Operating Liabilities	(298)	286
Net Cash Provided by (Used in) Operating Activities	9,376	24,276
Cash flows from investing activities:
Purchases of property and equipment	(20,573)	(21,264)
Increase (Decrease) in Other Noncurrent Assets	255	326
Net cash flows used in investing activities	(20,318)	(20,938)
Proceeds from Issuance of Secured Debt	348,200	259,720
Proceeds from (Repayments of) Secured Debt	(321,900)	(254,020)
Cash flows from financing activities:
Payments of Debt Issuance Costs	(1,716)	0
Payments for Repurchase of Common Stock	(857)	(2,359)
Proceeds from Stock Options Exercised	0	37
Net cash flows used in financing activities	23,727	3,378
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Including Exchange Rate Effect	12,785	6,716
Changes in other operating assets and liabilities, net:
Receivables, net	(72,970)	(96,981)
Merchandise inventories	(77,716)	(89,851)
Textbook rental inventories	(19,743)	(21,950)
Prepaid expenses and other current assets	12,538	(3,288)
Accounts payable and accrued liabilities	166,612	224,643
Changes in other operating assets and liabilities, net	(8,721)	(12,573)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	21,934	16,814
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	$ 34,719	$ 23,530

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Consolidated Statement of Equity Statement - USD ($) $ in Thousands	Total	Additional Paid-in Capital [Member]	Common Stock [Member]	Treasury Stock [Member]	Retained Earnings
Common Stock, Shares, Issued			53,327,000
Treasury Stock, Shares				1,948,000
Total Equity	$ 293,011	$ 734,257	$ 533	$ 19,142	$ (422,637)
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures			338,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	0	(3)	$ 3
Stock-based compensation expense	1,122	1,122
Shares repurchased for tax withholdings for vested stock awards				130,000
Treasury Stock, Value, Acquired, Cost Method				$ 1,215
CostOfRepurchasedSharesForTaxWittholdingForShareBasedCompensation	(1,215)
Net Income (Loss) Attributable to Parent	(43,628)
Net Income (Loss) Attributable to Parent	(21,100)
Common Stock, Shares, Issued			53,665,000
Treasury Stock, Shares				2,078,000
Total Equity	249,290	735,376	$ 536	$ 20,357	(466,265)
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures			487,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	0	(5)	$ 5
Stock-based compensation expense	1,478	1,478
Shares repurchased for tax withholdings for vested stock awards				108,000
CostOfRepurchasedSharesForTaxWittholdingForShareBasedCompensation	(1,144)			$ (1,144)
Stock Issued During Period, Value, Stock Options Exercised	37	37	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period			10,000
Net Income (Loss) Attributable to Parent	$ 22,528
Common Stock, Shares, Issued	54,162,000		54,162,000
Treasury Stock, Shares				2,186,000
Total Equity	$ 272,189	736,886	$ 541	$ 21,501	(443,737)
Common Stock, Shares, Issued	54,234,000		54,234,000
Treasury Stock, Shares				2,188,000
Total Equity	$ 228,374	740,838	$ 542	$ 21,512	(491,494)
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures			540,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	0	(5)	$ 5
Stock-based compensation expense	1,791	1,791
Shares repurchased for tax withholdings for vested stock awards				238,000
Treasury Stock, Value, Acquired, Cost Method				$ 612
CostOfRepurchasedSharesForTaxWittholdingForShareBasedCompensation	(612)
Net Income (Loss) Attributable to Parent	$ (52,707)
Shares repurchased for tax withholdings for vested stock awards	344,587
Net Income (Loss) Attributable to Parent	$ (30,563)
Common Stock, Shares, Issued			54,774,000
Treasury Stock, Shares				2,426,000
Total Equity	176,846	742,624	$ 547	$ 22,124	(544,201)
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures			357,000
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures	0	(4)	$ 4
Stock-based compensation expense	1,719	1,719
Shares repurchased for tax withholdings for vested stock awards				107,000
CostOfRepurchasedSharesForTaxWittholdingForShareBasedCompensation	(245)			$ (245)
Net Income (Loss) Attributable to Parent	$ 22,144
Common Stock, Shares, Issued	55,132,000		55,131,000
Treasury Stock, Shares				2,533,000
Total Equity	$ 200,464	$ 744,339	$ 551	$ 22,369	$ (522,057)

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Organization

6 Months Ended

Oct. 29, 2022

Organization

Note 1. Organization

Description of Business

Barnes & Noble Education, Inc. (“BNED”) is one of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. We are also one of the largest textbook wholesalers, inventory management hardware and software providers, and a leading provider of digital education solutions. We operate 1,399 physical, virtual, and custom bookstores and serve more than 6 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment. Additionally, we offer direct-to-student products and services to help students study more effectively and improve academic performance.

The strengths of our business include our ability to compete by developing new products and solutions to meet market needs, our large operating footprint with direct access to students and faculty, our well-established, deep relationships with academic partners and stable, long-term contracts and our well-recognized brands. We expect to continue to introduce scalable and advanced digital solutions focused largely on the student, expand our e-commerce capabilities and accelerate such capabilities through our merchandising partnership with Fanatics Retail Group Fulfillment, LLC, Inc. (“Fanatics”) and Fanatics Lids College, Inc. (“FLC”) (collectively referred to herein as the “FLC Partnership”), increase market share with new accounts, and expand our strategic opportunities through acquisitions and partnerships.

We expect gross general merchandise sales to increase over the long term, as our product assortments continue to emphasize and reflect changing consumer trends, and we evolve our presentation concepts and merchandising of products in stores and online, which we expect to be further enhanced and accelerated through the FLC Partnership. Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo and emblematic general merchandise business.

The Barnes & Noble brand (licensed from our former parent) along with our subsidiary brands, BNC and MBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States. Our large college footprint, reputation, and credibility in the marketplace not only support our marketing efforts to universities, students, and faculty, but are also important to our relationship with leading publishers who rely on us as one of their primary distribution channels, and for being a trusted source for students in our direct-to-student digital solutions business.

We have three reportable segments: Retail, Wholesale and DSS. For additional information related to our strategies, operations and segments, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

First Day Inclusive and Equitable Access Programs

We provide product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. We offer our BNC First Day® inclusive and equitable access programs, consisting of First Day Complete and First Day, in which course materials, including both physical and digital content, are offered at a reduced price through a course fee or included in tuition, and delivered to students on or before the first day of class.

•First Day Complete is adopted by an institution and includes all classes, providing students both physical and digital materials. The First Day Complete model drives substantially greater unit sales and sell-through for the bookstore.

•Through First Day, digital course materials are adopted by a faculty member for a single course, and students receive their materials through their school's learning management system.

Offering courseware sales through our inclusive and equitable access First Day Complete and First Day models is a key, and increasingly important strategic initiative of ours to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing our market share, revenue and relative gross profits of courseware sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. We expect these programs to allow us to ultimately reverse historical long-term trends in courseware revenue declines, which has occurred at those schools where such programs have been adopted. We are moving quickly and decisively to accelerate our First Day Complete strategy. We plan to move many institutions to First Day Complete for the Fall of 2023 and the majority of schools by Fall 2024.

Approximately 111 campus stores adopted our First Day Complete course materials delivery program for the 2022 Fall Term, representing approximately 545,000 (as reported by National Center for Education Statistics) in total undergraduate student enrollment, a growth rate of 85% over Fall 2021. During the 13 weeks ended October 29, 2022, First Day Complete sales increased by $44,301 to $89,892, or 97%, as compared to $45,591 in the prior year period. During the 26 weeks ended October 29, 2022, First Day Complete sales increased by $54,732 to $106,314, or 106%, as compared to $51,582 in the prior year period.

Partnership with Fanatics and FLC

In December 2020, we entered into the FLC Partnership. Through this partnership, we receive unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our general merchandise business. Fanatics’ cutting-edge e-commerce and technology expertise offers our campus stores expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with Lids (FLC's parent company), the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, our campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.

We maintain our relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores. We also work closely with our campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand. We leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites. FLC manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores, and FLC owns the inventory it manages, relieving us of the obligation to finance inventory purchases from working capital.

COVID-19 Business Impact

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities. Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years. We cannot accurately predict the duration or extent of the impact of the COVID-19 virus, including variants, on enrollments, campus activities, university budgets, athletics and other areas that directly affect our business operations. Although most four year schools returned to a traditional on-campus environment, there is still uncertainty about the duration and extent of the impact of the COVID-19 pandemic, including on enrollments at community colleges and by international students, the continuation of remote and hybrid class offerings, and its effect on our ability to source products, including textbooks and general merchandise offerings.

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Employees Benefit Plan

6 Months Ended

Oct. 29, 2022

Employees' Defined Contribution Plan

Note 11. Employee Benefit Plans

We sponsor defined contribution plans for the benefit of substantially all of the employees of BNC and DSS. MBS maintains a profit sharing plan covering substantially all full-time employees of MBS. For all plans, we are responsible to fund the employer contributions directly. Total employee benefit expense for these plans was $1,069 and $1,004 during the 13 weeks ended October 29, 2022 and October 30, 2021, respectively. Total employee benefit expense for these plans was $2,394 and $1,048 during the 26 weeks ended October 29, 2022 and October 30, 2021, respectively.

Effective April 2020, due to the significant impact as a result of COVID-19 related campus store closures, we temporarily suspended employer matching contributions into our 401(k) plans. The matching contributions were reinstated effective July 25, 2021.

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Organization - Additional Information $ in Thousands, Person in Millions	3 Months Ended		6 Months Ended
	Oct. 29, 2022 USD ($) Store	Oct. 30, 2021 USD ($)	Oct. 29, 2022 USD ($) Person Store segment	Oct. 30, 2021 USD ($)
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of Stores | Store	1,399		1,399
Number of students covered to build relationships and derive sales | Person			6
Number of Reportable Segments | segment			3
Revenues	$ 617,098	$ 626,977	$ 880,956	$ 867,771
Retail Segment [Member]
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Revenues	$ 598,610	$ 608,952	$ 835,117	$ 819,421
First Day Complete
Organization Consolidation And Presentation Of Financial Statements [Line Items]
First Day Complete Revenue description			Approximately 111 campus stores adopted our First Day Complete course materials delivery program for the 2022 Fall Term, representing approximately 545,000 (as reported by National Center for Education Statistics) in total undergraduate student enrollment, a growth rate of 85% over Fall 2021. During the 13 weeks ended October 29, 2022, First Day Complete sales increased by $44,301 to $89,892, or 97%, as compared to $45,591 in the prior year period. During the 26 weeks ended October 29, 2022, First Day Complete sales increased by $54,732 to $106,314, or 106%, as compared to $51,582 in the prior year period.

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Employees Benefit Plans - Additional Information - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 29, 2022	Oct. 30, 2021	Oct. 29, 2022	Oct. 30, 2021
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Company contributions, employee benefit expenses	$ 1,069	$ 1,004	$ 2,394	$ 1,048

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Summary of Significant Accounting Policies (Notes)

6 Months Ended

Oct. 29, 2022

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Our condensed consolidated financial statements reflect our condensed consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported. These condensed consolidated financial statements are condensed and therefore do not include all of the information and footnotes required by GAAP. All material intercompany accounts and transactions have been eliminated in consolidation.

Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. For certain of our retail operations, sales are generally highest in the second and third fiscal quarters, when students purchase and rent textbooks and other course materials for the typical academic year, and lowest in the first and fourth fiscal quarters. Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as MBS sells textbooks and other course materials for retail distribution. Our DSS segment sales and operating profit are realized relatively consistently throughout the year.

Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. Due to the seasonal nature of the business, the results of operations for the 13 and 26 weeks ended October 29, 2022 are not indicative of the results expected for the 52 weeks ending April 29, 2023 (Fiscal 2023).

Use of Estimates

In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Restricted Cash

As of October 29, 2022 and October 30, 2021, we had restricted cash of $15,590 and $12,534, respectively, comprised of $14,686 and $11,637, respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement, and $904 and $897, respectively, in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

Merchandise Inventories

Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory, which includes certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand.

Cost is determined primarily by the retail inventory method for our Retail segment and last-in first out, or “LIFO”, method for our Wholesale segment. Our textbook inventories, for Retail and Wholesale, and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories.

For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends.

The Retail Segment courseware fulfillment order is directed first to our wholesale business before other sources of inventory are utilized. The products that we sell originate from a wide variety of domestic and international vendors. After internal sourcing, the bookstore purchases courseware from outside suppliers and publishers.

As contemplated by the FLC Partnership merchandising agreement, we sold our logo and emblematic general merchandise inventory to FLC and received proceeds of $41,773, and recognized a merchandise inventory loss on the sale of $10,262 in cost of goods sold in the condensed consolidated statement of operations during the 52 weeks ended May 1, 2021 for the Retail Segment. The final inventory sale price was determined during the first quarter of Fiscal 2022, at which time, we received additional proceeds of $1,906, and recognized a merchandise inventory loss on the sale of $434 in cost of goods sold in the condensed consolidated statement of operations for the Retail Segment.

Textbook Rental Inventories

Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost.

Leases

We recognize lease assets and lease liabilities on the condensed consolidated balance sheet for all operating lease arrangements based on the present value of future lease payments as required by Accounting Standards Codification ("ASC") Topic 842, Leases. We do not recognize lease assets or lease liabilities for short-term leases (i.e., those with a term of twelve months or less). We recognize lease expense on a straight-line basis over the lease term for contracts with fixed lease payments, including those with fixed annual minimums, or over a rolling twelve-month period for leases where the annual guarantee resets at the start of each contract year, in order to best reflect the pattern of usage of the underlying leased asset. For additional information, see Note 8. Leases.

Revenue Recognition and Deferred Revenue

Product sales and rentals

The majority of our revenue is derived from the sale of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Note 3. Revenue.

Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

Revenue from the rental of physical textbooks, which contains a single performance obligation, is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer. Rental periods are typically for a single semester and are always less than one year in duration. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale.

Revenue from the rental of digital textbooks, which contains a single performance obligation, is recognized at the point of sale. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content. While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete.

We estimate returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.

For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis. Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition.

We do not have gift card or customer loyalty programs. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year.

Service and other revenue

Service and other revenue is primarily derived from DSS segment subscription-based service revenues and partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers.

Subscription-based revenue, which contains a single performance obligation, is deferred and recognized based on the passage of time over the subscription period commencing at the point of sale, when control of the service transfers to the customer. The majority of subscriptions sold are one month in duration.

Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers. For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.

Cost of Sales

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Selling and Administrative Expenses

Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our DSS segment subscription-based services business. Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services.

Evaluation of Goodwill and Other Long-Lived Assets

As of October 29, 2022, we had $4,700 of goodwill on our condensed consolidated balance sheet related to our DSS reporting unit. In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. As of October 29, 2022, our other long-lived assets include property and equipment, operating lease right-of-use assets, amortizable intangibles, and other noncurrent assets of $96,096, $291,704, $121,487, and $20,980, respectively, on our condensed consolidated balance sheet.

Our business has been significantly negatively impacted by the COVID-19 pandemic, as many schools adjusted their learning models and on-campus activities. Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. However, on campus traffic continues to grow from increased campus events and activities, as compared to the last two years. In Fiscal 2022, we continued to experience the ongoing effects of COVID-19 with the surge of the Omicron variant further impacting students return to campus and on-campus activities. While the majority of schools brought students back to campus, some schools chose to conduct classes virtually.

Income Taxes

The provision for income taxes includes federal, state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax basis of assets and liabilities. The deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. We regularly review deferred tax assets for recoverability and establish a valuation allowance, if determined to be necessary.

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Revenue (Notes)

6 Months Ended

Oct. 29, 2022

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

Note 3. Revenue

Revenue from sales of our products and services is recognized either at the point in time when control of the products is transferred to our customers or over time as services are provided in an amount that reflects the consideration we expect to be entitled to in exchange for the products or services. See Note 2. Summary of Significant Accounting Policies for additional information related to our revenue recognition policies and Note 4. Segment Reporting for a description of each segment's product and service offerings.

Disaggregation of Revenue

The following table disaggregates the revenue associated with our major product and service offerings:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Retail
Course Materials Product Sales	$	419,879	$	433,734	$	547,476	$	555,954
General Merchandise Product Sales (a)	122,648		106,200		211,472		171,623
Service and Other Revenue (b)	14,749		19,370		23,923		29,172
Retail Product and Other Sales sub-total	557,276		559,304		782,871		756,749
Course Materials Rental Income	41,334		49,648		52,246		62,672
Retail Total Sales	$	598,610	$	608,952	$	835,117	$	819,421
Wholesale Sales	$	21,120	$	21,669	$	58,203	$	66,153
DSS Sales (c)	$	8,465	$	8,279	$	17,649	$	16,582
Eliminations (d)	$	(11,097)	$	(11,923)	$	(30,013)	$	(34,385)
Total Sales	$	617,098	$	626,977	$	880,956	$	867,771

(a)Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition.

(b)Service and other revenue primarily relates to brand partnerships and other service revenues.

(c)DSS sales primarily relate to direct-to-student subscription-based revenue.

(d)The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

Contract Liabilities

Contract liabilities represent an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability (deferred revenue). Deferred revenue consists of the following:

•advanced payments from customers related to textbook rental and subscription-based performance obligations, which are recognized ratably over the terms of the related rental or subscription periods;

•unsatisfied performance obligations associated with partnership marketing services, which are recognized when the contracted services are provided to our partnership marketing customers; and

•unsatisfied performance obligations associated with the premium paid for the sale of treasury shares, which are expected to be recognized over the term of the e-commerce and merchandising contracts for Fanatics and FLC, respectively.

The following table presents changes in deferred revenue associated with our contract liabilities:

	26 weeks ended
	October 29, 2022		October 30, 2021
Deferred revenue at the beginning of period	$	19,722	$	18,139
Additions to deferred revenue during the period	114,975		82,515
Reductions to deferred revenue for revenue recognized during the period	(83,651)		(66,364)
Deferred revenue balance at the end of period:	$	51,046	$	34,290
Balance Sheet classification:
Accrued liabilities	$	46,610	$	29,820
Other long-term liabilities	4,436		4,470
Deferred revenue balance at the end of period:	$	51,046	$	34,290

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Segment Reporting (Notes)

6 Months Ended

Oct. 29, 2022

Segment Reporting

Note 4. Segment Reporting

We have three reportable segments: Retail, Wholesale and DSS. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as “Corporate Services”.

We identify our segments in accordance with the way our business is managed (focusing on the financial information distributed) and the manner in which our chief operating decision maker allocates resources and assesses financial performance. The following summarizes the three segments. For additional information about each segment's operations, see Part I - Item 1. Business in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

Retail

The Retail Segment operates 1,399 college, university, and K-12 school bookstores, comprised of 793 physical bookstores and 606 virtual bookstores. Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce websites which we operate independently or along with our merchant partners, and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts. The Retail Segment also offers inclusive and equitable access programs, in which course materials are offered at a reduced price through a fee charged by the institution or included in tuition, and delivered to students on or before the first day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.

Wholesale

The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,100 physical bookstores (including our Retail Segment's 793 physical bookstores) and sources and distributes new and used textbooks to our 606 virtual bookstores. Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 350 college bookstores.

DSS

The Digital Student Solutions (“DSS”) Segment includes products and services to assist students to study more effectively and improve academic performance. The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby®, an institutional and direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, writing and tutoring.

Corporate Services represents unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

Intercompany Eliminations

The eliminations are primarily related to the following intercompany activities:

•The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale, and

•These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

Our international operations are not material, and the majority of the revenue and total assets are within the United States.

Summarized financial information for our reportable segments is reported below:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Sales:
Retail	$	598,610	$	608,952	$	835,117	$	819,421
Wholesale	21,120		21,669		58,203		66,153
DSS	8,465		8,279		17,649		16,582
Elimination	(11,097)		(11,923)		(30,013)		(34,385)
Total Sales	$	617,098	$	626,977	$	880,956	$	867,771
Gross Profit
Retail (a)	$	129,502	$	128,825	$	183,495	$	176,968
Wholesale	5,455		5,620		12,354		16,025
DSS	6,694		6,906		14,177		13,936
Elimination	3,184		4,208		(1,703)		(1,341)
Total Gross Profit	$	144,835	$	145,559	$	208,323	$	205,588
Selling and Administrative Expenses
Retail	$	90,086	$	89,486	$	169,090	$	157,851
Wholesale	3,867		4,387		7,998		8,378
DSS	8,132		7,305		16,277		13,752
Corporate Services	5,075		6,809		12,289		14,253
Elimination	(74)		(85)		(82)		(97)
Total Selling and Administrative Expenses	$	107,086	$	107,902	$	205,572	$	194,137
Depreciation and Amortization
Retail	$	8,869	$	8,669	$	18,398	$	18,076
Wholesale	1,370		1,364		2,719		2,664
DSS	503		1,902		2,140		3,801
Corporate Services	17		17		35		35
Total Depreciation and Amortization	$	10,759	$	11,952	$	23,292	$	24,576
Operating Income (Loss)
Retail	$	30,547	$	29,595	$	(3,993)	$	(1,042)
Wholesale	218		(131)		1,637		4,983
DSS	(1,941)		(2,301)		(4,240)		(3,617)
Corporate Services	(5,352)		(6,867)		(12,959)		(15,226)
Elimination	3,258		4,293		(1,621)		(1,244)
Total Operating Income (Loss)	$	26,730	$	24,589	$	(21,176)	$	(16,146)

	13 weeks ended				26 weeks ended
Reconciliation of segment Operating Income (Loss) to consolidated Income (Loss) Before Income Taxes:	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Total Operating Income (Loss)	$	26,730	$	24,589	$	(21,176)	$	(16,146)
Interest Expense, net	4,886		2,264		8,754		4,758
Income (Loss) Before Income Taxes	$	21,844	$	22,325	$	(29,930)	$	(20,904)

(a)    For the 26 weeks ended October 30, 2021, gross margin includes a merchandise inventory loss of $434 in the Retail Segment. See Note 2. Summary of Significant Accounting Policies - Merchandise Inventories.

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Equity and Earnings Per Share (Notes)

6 Months Ended

Oct. 29, 2022

Net Earnings (Loss) Per Share

Note 5. Equity and Earnings Per Share

Equity

Share Repurchases

During the 26 weeks ended October 29, 2022, we did not repurchase shares of our Common Stock under the stock repurchase program and as of October 29, 2022, approximately $26,669 remains available under the stock repurchase program.

During the 26 weeks ended October 29, 2022, we repurchased 344,587 shares of our Common Stock outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Earnings Per Share

Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company.

During the 13 weeks ended October 29, 2022 and October 30, 2021, average shares of 3,153,516 and 523,447 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively. During the 26 weeks ended October 29, 2022 and October 30, 2021, average shares of 4,898,303 and 3,771,594 were excluded from the diluted earnings per share calculation as their inclusion would have been antidilutive, respectively.

The following is a reconciliation of the basic and diluted earnings per share calculation:

	13 weeks ended				26 weeks ended
(shares in thousands)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Numerator for basic earnings per share:
Net income (loss) available to common shareholders	$	22,144	$	22,528	$	(30,563)	$	(21,100)
Less allocation of earnings to participating securities	(11)		(64)		—		—
Net income (loss) available to common shareholders	$	22,133	$	22,464	$	(30,563)	$	(21,100)
Numerator for diluted earnings per share:
Net income (loss) available to common shareholders	$	22,133	$	22,464	$	(30,563)	$	(21,100)
Allocation of earnings to participating securities	11		64		—		—
Less diluted allocation of earnings to participating securities	(11)		(61)		—		—
Net income (loss) available to common shareholders	$	22,133	$	22,467	$	(30,563)	$	(21,100)
Denominator for basic earnings per share:
Basic weighted average shares of Common Stock	52,438		51,666		52,305		51,570
Denominator for diluted earnings per share:
Basic weighted average shares of Common Stock	52,438		51,666		52,305		51,570
Average dilutive restricted stock units	141		611		—		—
Average dilutive performance shares	—		—		—		—
Average dilutive restricted shares	10		126		—		—
Average dilutive performance share units	—		255		—		—
Average dilutive stock options	606		1,910		—		—
Diluted weighted average shares of Common Stock	53,195		54,568		52,305		51,570
Earnings (Loss) per share of Common Stock:
Basic	$	0.42	$	0.43	$	(0.58)	$	(0.41)
Diluted	$	0.42	$	0.41	$	(0.58)	$	(0.41)

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Fair Values of Financial Instruments (Notes)

6 Months Ended

Oct. 29, 2022

Fair Value Disclosures

Note 6. Fair Value Measurements

In accordance with ASC No. 820, Fair Value Measurements and Disclosures, the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1—Observable inputs that reflect quoted prices in active markets

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions

Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable. The fair values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1. The fair value of short-term and long-term debt approximates its carrying value.

Non-Financial Assets and Liabilities

Our non-financial assets include goodwill, property and equipment, operating lease right-of-use assets, and intangible assets. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets.

Other Non-Financial Liabilities

We granted phantom share units as long-term incentive awards which are settled in cash based on the fair market value of a share of common stock of the Company at each vesting date. The fair value of the liability for the cash-settled phantom share unit awards will be remeasured at the end of each reporting period through settlement to reflect current risk-free rate and volatility assumptions. As of October 29, 2022, we recorded a liability of $1,398 (Level 2 input) which is reflected in accrued liabilities ($1,318) and other long-term liabilities ($80) on the condensed consolidated balance sheet. As of October 30, 2021, we recorded a liability of $3,474 (Level 2 input) which is reflected in accrued liabilities ($2,345) and other long-term liabilities ($1,129) on the condensed consolidated balance sheet. For additional information, see Note 10. Long-Term Incentive Plan Compensation Expense.

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Debt (Notes)

6 Months Ended

Oct. 29, 2022

Debt Disclosure

Note 7. Debt

Credit Facility

We have a credit agreement (the “Credit Agreement”), amended March 31, 2021 and March 1, 2019, under which the lenders committed to provide us with a 5 year asset-backed revolving credit facility in an aggregate committed principal amount of $400,000 (the “Credit Facility”) effective from the March 1, 2019 amendment. We have the option to request an increase in commitments under the Credit Facility of up to $100,000, subject to certain restrictions. Proceeds from the Credit Facility are used for general corporate purposes, including seasonal working capital needs. The agreement includes an incremental first in, last out seasonal loan facility (the “FILO Facility”) for a $100,000 incremental facility maintaining the maximum availability under the Credit Agreement at $500,000. As of October 29, 2022, we were in compliance with all debt covenants under the Credit Agreement.

On March 4, 2022, we were granted a waiver to the condition to the draw scheduled for April 2022 under the FILO Facility, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $110,000. Under the waiver amendment, the commitment under the FILO Facility of $25,000 was increased to $40,000, with all remaining terms unchanged.

For additional information including interest terms and covenant requirements related to the Credit Facility, refer to Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

During the 26 weeks ended October 29, 2022, we borrowed $318,200 and repaid $321,900 under the Credit Agreement, with $222,000 of outstanding borrowings as of October 29, 2022, comprised entirely of borrowings under the Credit Facility. During the 26 weeks ended October 30, 2021, we borrowed $259,720 and repaid $254,020 under the Credit Agreement, with $183,300 of outstanding borrowings as of October 30, 2021, comprised entirely of borrowings under the Credit Facility. As of both October 29, 2022 and October 30, 2021, we have issued $4,759 in letters of credit under the Credit Facility.

Term Loan

On June 7, 2022, we entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with TopLids LendCo, LLC and Vital Fundco, LLC and we entered an amendment to our existing Credit Agreement. For additional information, see the Company’s Report on Form 8-K dated June 7, 2022 and filed with the SEC on June 10, 2022.

The Term Loan Credit Agreement provides for term loans in an amount equal to $30,000 (the “Term Loan Facility” and, the loans thereunder, the “Term Loans”). The proceeds of the Term Loans are being used to finance working capital, and to pay fees and expenses related to the Term Loan Facility. During the 26 weeks ended October 29, 2022, we borrowed $30,000 and repaid $0 under the Term Loan Credit Agreement, with $30,000 of outstanding borrowings as of October 29, 2022.

We incurred debt issuance costs totaling $1,964 related to the Term Loan Credit Agreement. The debt issuance costs have been deferred and are presented as prepaid and other current assets and other noncurrent assets in the consolidated balance sheets, and subsequently amortized ratably over the term of the Term Loan Facility.

The Term Loans accrue interest at a rate equal to 11.25%, payable quarterly, and mature on June 7, 2024. We have the right, through December 31, 2022, to pay all or a portion of the interest on the Term Loans in kind. To date, all interest on the term loan has been paid in cash. The Term Loans do not amortize prior to maturity. Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we must pay a fee of 1.5% of the outstanding principal amount of the Term Loans on such date.

The Term Loans are required to be repaid (i) after repayment of the FILO Facility under the Credit Agreement, with up to 100% of the proceeds of the sale of a non-core business line of the Company generating net proceeds in excess of $1,000, other than ordinary course dispositions and (ii) in full in connection with a debt or equity financing transaction generating net proceeds in excess of an amount sufficient to repay the FILO Facility under the Credit Agreement.

The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions. The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.

The Credit Agreement amendment permitted us to incur the Term Loan Facility and also provides that, upon repayment of the Term Loan Credit Agreement (and, if applicable, any replacement credit facility thereof), we may incur second lien secured debt in an aggregate principal amount not to exceed $75,000.

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Leases (Notes)

6 Months Ended

Oct. 29, 2022

Leases [Abstract]

Lessee, Operating Leases

Note 8. Leases

We recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements as required by FASB ASC 842, Leases (Topic 842). Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less).

We recognize a right of use ("ROU") asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year.

Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants.

We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later.

The following table summarizes lease expense:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Variable lease expense	$	25,281	$	30,738	$	40,465	$	42,440
Operating lease expense	52,998		48,990		75,860		65,363
Net lease expense	$	78,279	$	79,728	$	116,325	$	107,803

The increase in lease expense during the 26 weeks ended October 29, 2022 is primarily due to higher sales for contracts based on a percentage of revenue during the 26 weeks ended October 29, 2022, the impact of the timing due to contract renewals, and the increase in minimum contractual guarantees which were temporarily eliminated in the prior year due to limited on campus store traffic resulting from the COVID pandemic.

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of October 29, 2022:

	As of
	October 29, 2022
Remainder of Fiscal 2023	$	102,628
Fiscal 2024	58,137
Fiscal 2025	50,811
Fiscal 2026	38,301
Fiscal 2027	30,161
Thereafter	83,321
Total lease payments	363,359
Less: imputed interest	(41,799)
Operating lease liabilities at period end	$	321,560

Future lease payment obligations related to leases that were entered into, but did not commence as of October 29, 2022, were not material. The following summarizes additional information related to our operating leases:

	As of
	October 29, 2022			October 30, 2021
Weighted average remaining lease term (in years)	5.3 years			5.3 years
Weighted average discount rate	4.4		%	4.6		%
Supplemental cash flow information:
Cash payments for lease liabilities within operating activities	$	75,876		$	64,103
Right-of-use assets obtained in exchange for lease liabilities from initial recognition	$	86,045		$	77,811

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Supplementary Information (Notes)

6 Months Ended

Oct. 29, 2022

Supplementary info [Abstract]

Supplementary Information [Text Block]

Note 9. Supplementary Information

Restructuring and other charges

During the 13 and 26 weeks ended October 29, 2022, we recognized restructuring and other charges totaling $260 and $635, respectively, comprised primarily of costs associated with professional service costs for restructuring and process improvements.

During the 13 and 26 weeks ended October 30, 2021, we recognized restructuring and other charges totaling $1,116 and $3,021, respectively, comprised primarily of $418 and $1,250, respectively, for severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction objectives, ($754 is included in accrued liabilities in the condensed consolidated balance sheet as of October 30, 2021), $698 and $1,771, respectively, for costs associated with professional service costs for restructuring, process improvements, development and integration associated with the FLC Partnership, shareholder activist activities, and liabilities for a facility closure.

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Stock-Based Compensation Stock-Based Compensation (Notes)

6 Months Ended

Oct. 29, 2022

Share-Based Payment Arrangement [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 10. Long-Term Incentive Plan Compensation Expense

We recognize compensation expense for restricted stock awards and performance share awards ratably over the requisite service period of the award, which is generally three years. We recognize compensation expense for these awards based on the number of awards expected to vest, which includes an estimated average forfeiture rate. We calculate the fair value of these awards based on the closing stock price on the date the award was granted. For those awards with market conditions, we have determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably over the requisite service period regardless of whether the market condition is satisfied.

For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte Carlo simulation model. The fair value models for stock options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of the options.

During the 26 weeks ended October 29, 2022, we granted the following awards:

•82,628 restricted stock units ("RSU") awards and 11,804 restricted stock ("RS") awards with a one year vesting period to the Board of Directors ("BOD") members for annual compensation.

•878,247 restricted stock units ("RSU") awards to employees with a three year vesting period.

•322,495 stock options with an exercise price of $2.36 per stock option, which was the fair market value on the date of grant (Stock Option Grant #1) and 348,723 stock options with an exercise price of $4.86 per stock option, which was above the fair market value on the date of grant, (Stock Option Grant #2) granted to employees. The stock options are exercisable in four equal annual installments commencing one year after the date of grant and have a ten year term. Holders are not entitled to receive dividends (if any) prior to vesting and exercise of the options. The following summarizes the stock option fair value assumptions:

	Stock Option Grant #1			Stock Option Grant #2
Exercise Price	$	2.36		$	4.86
Valuation method utilized	Black-Scholes			Monte Carlo
Risk-free interest rate	3.28		%	3.28		%
Expected option term	6.3 years			10.0 years
Company volatility	74		%	74		%
Dividend yield	—		%	—		%
Grant date fair value per award	$	1.61		$	1.28

The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected stock option term. For Stock Option Grant #1, we are permitted to use the simplified approach to estimate the expected term of the stock options, which typically assumes exercise occurs at the mid-point between the end of the vesting period and the expiration date. The simplified approach is not allowed for premium-priced options (Stock Option Grant #2), which were estimated using a stock price multiple, as there is no option exercise history which to base an early exercise option. The expected stock option term represents the weighted average period of time that stock options granted are expected to be outstanding, based on vesting schedules and the contractual term of the stock options. Volatility is based on the historical volatility of the Company’s common stock over a period of time corresponding to the expected stock option term.

We recognized compensation expense for long-term incentive plan awards in selling and administrative expenses as follows:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Stock-based awards
Restricted stock expense	$	64	$	119	$	158	$	207
Restricted stock units expense	990		931		2,013		1,661
Performance share units expense	—		29		10		63
Stock option expense	665		399		1,329		669
Sub-total stock-based awards:	$	1,719	$	1,478	$	3,510	$	2,600
Cash settled awards
Phantom share units expense	$	66	$	2,452	$	268	$	4,924
Total compensation expense for long-term incentive awards	$	1,785	$	3,930	$	3,778	$	7,524

Total unrecognized compensation cost related to unvested awards as of October 29, 2022 was $13,077 and is expected to be recognized over a weighted-average period of 2.3 years.

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Income Taxes Income Taxes (Notes)

6 Months Ended

Oct. 29, 2022

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 12. Income Taxes

We recorded an income tax benefit of $(300) on pre-tax income of $21,844 during the 13 weeks ended October 29, 2022, which represented an effective income tax rate of (1.4)% and an income tax benefit of $(203) on pre-tax income of $22,325 during the 13 weeks ended October 30, 2021, which represented an effective income tax rate of (0.9)%.

We recorded an income tax expense of $633 on pre-tax loss of $(29,930) during the 26 weeks ended October 29, 2022, which represented an effective income tax rate of (2.1)% and an income tax expense of $196 on pre-tax loss of $(20,904) during the 26 weeks ended October 30, 2021, which represented an effective income tax rate of (0.9)%.

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. As of October 29, 2022, we determined that it was more likely than not that we would not realize all deferred tax assets and our tax rate for the current fiscal year reflects this determination. We will continue to evaluate this position.

The effective tax rate for the 13 and 26 weeks ended October 29, 2022 is lower as compared to the prior year comparable period due to foreign taxes and lower projected annual taxable loss in the current year.

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Legal Proceedings (Notes)	6 Months Ended
	Oct. 29, 2022
Legal Proceedings	Note 13. Legal Proceedings We are involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of our business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, personal injuries and other matters. The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on our condensed consolidated financial position, results of operations, or cash flows.

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Subsequent Events	6 Months Ended
	Oct. 29, 2022
Subsequent Events [Abstract]
Subsequent Events	Note 14. Subsequent Event On December 2, 2022, the Board of Directors approved a company-wide initiative to drive efficiencies, streamline operations, simplify the organizational structure and further reduce non-essential costs. These actions are expected to be substantially implemented within thirty days. The Company expects to incur restructuring charges, primarily related to severance, of approximately $5,000 to $6,000 in the third quarter of fiscal 2023 and expects to save $10,000 to $15,000 in fiscal year 2023. These initiatives are expected to provide annualized savings of $30,000 to $35,000 once fully implemented. The restructuring charges are excluded from non-GAAP adjusted EBITDA and from the annualized and fiscal year 2023 savings.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Oct. 29, 2022

Basis of Presentation

Basis of Presentation and Consolidation

Our condensed consolidated financial statements reflect our condensed consolidated financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position and the results of its operations and cash flows for the periods reported. These condensed consolidated financial statements are condensed and therefore do not include all of the information and footnotes required by GAAP. All material intercompany accounts and transactions have been eliminated in consolidation.

Our business is highly seasonal. Our quarterly results also may fluctuate depending on the timing of the start of the various schools' semesters, as well as shifts in our fiscal calendar dates. These shifts in timing may affect the comparability of our results across periods. For certain of our retail operations, sales are generally highest in the second and third fiscal quarters, when students purchase and rent textbooks and other course materials for the typical academic year, and lowest in the first and fourth fiscal quarters. Sales attributable to our wholesale business are generally highest in our first, second and third quarters, as MBS sells textbooks and other course materials for retail distribution. Our DSS segment sales and operating profit are realized relatively consistently throughout the year.Our fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. Due to the seasonal nature of the business, the results of operations for the 13 and 26 weeks ended October 29, 2022 are not indicative of the results expected for the 52 weeks ending April 29, 2023 (Fiscal 2023).

Use of Estimates

Use of Estimates

In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Merchandise Inventories

Merchandise Inventories

Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory, which includes certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand.

Cost is determined primarily by the retail inventory method for our Retail segment and last-in first out, or “LIFO”, method for our Wholesale segment. Our textbook inventories, for Retail and Wholesale, and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of our inventories.

For our physical bookstores, we also estimate and accrue shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends.

The Retail Segment courseware fulfillment order is directed first to our wholesale business before other sources of inventory are utilized. The products that we sell originate from a wide variety of domestic and international vendors. After internal sourcing, the bookstore purchases courseware from outside suppliers and publishers.

As contemplated by the FLC Partnership merchandising agreement, we sold our logo and emblematic general merchandise inventory to FLC and received proceeds of $41,773, and recognized a merchandise inventory loss on the sale of $10,262 in cost of goods sold in the condensed consolidated statement of operations during the 52 weeks ended May 1, 2021 for the Retail Segment. The final inventory sale price was determined during the first quarter of Fiscal 2022, at which time, we received additional proceeds of $1,906, and recognized a merchandise inventory loss on the sale of $434 in cost of goods sold in the condensed consolidated statement of operations for the Retail Segment.

Textbook Rentals Inventories

Textbook Rental Inventories

Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of goods sold. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost.

Revenue Recognition

Revenue Recognition and Deferred Revenue

Product sales and rentals

The majority of our revenue is derived from the sale of products through our bookstore locations, including virtual bookstores, and our bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from sales of our products is recognized at the point in time when control of the products is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for the products. For additional information, see Note 3. Revenue.

Retail product revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

Revenue from the rental of physical textbooks, which contains a single performance obligation, is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer. Rental periods are typically for a single semester and are always less than one year in duration. We offer a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. We record the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, we accelerate any remaining deferred rental revenue at the point of sale.

Revenue from the rental of digital textbooks, which contains a single performance obligation, is recognized at the point of sale. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content. While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, our performance obligation is complete.

We estimate returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.

For sales and rentals involving third-party products, we evaluate whether we are acting as a principal or an agent. Our determination is based on our evaluation of whether we control the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether we control the specified goods or services prior to transferring them to the customer including whether we have the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where we are the principal, we record revenue on a gross basis, and for those transactions where we are an agent to a third-party, we record revenue on a net basis. Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition.

We do not have gift card or customer loyalty programs. We do not treat any promotional offers as expenses. Sales tax collected from our customers is excluded from reported revenues. Our payment terms are generally 30 days and do not extend beyond one year.

Service and other revenue

Service and other revenue is primarily derived from DSS segment subscription-based service revenues and partnership marketing services which includes promotional activities and advertisements within our physical bookstores and web properties performed on behalf of third-party customers.

Subscription-based revenue, which contains a single performance obligation, is deferred and recognized based on the passage of time over the subscription period commencing at the point of sale, when control of the service transfers to the customer. The majority of subscriptions sold are one month in duration.

Partnership marketing agreements often include multiple performance obligations which are individually negotiated with our customers. For these arrangements that contain distinct performance obligations, we allocate the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for partnership marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions.

Lessee, Leases [Policy Text Block]

We recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements as required by FASB ASC 842, Leases (Topic 842). Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less).

We recognize a right of use ("ROU") asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year.

Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants.

We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later.

Cost of Sales, Policy [Policy Text Block]

Cost of Sales

Our cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.

Selling, General and Administrative Expenses, Policy [Policy Text Block]

Selling and Administrative Expenses

Our selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, finance and accounting, and operating costs related to our DSS segment subscription-based services business. Shared-service costs such as human resources, legal, treasury, information technology, and various other corporate level expenses and other governance functions, are not allocated to any specific reporting segment and are recorded in Corporate Services.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Evaluation of Goodwill and Other Long-Lived Assets As of October 29, 2022, we had $4,700 of goodwill on our condensed consolidated balance sheet related to our DSS reporting unit. In accordance with ASC 350-10, Intangibles - Goodwill and Other, we complete our annual goodwill impairment test as of the first day of the third quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets.

Consolidation, Subsidiaries or Other Investments, Consolidated Entities, Policy [Policy Text Block]

Intercompany Eliminations

The eliminations are primarily related to the following intercompany activities:

•The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale, and

•These cost of sales eliminations represent (i) the recognition of intercompany profit for Retail inventory that was purchased from Wholesale in a prior period that was subsequently sold to external customers during the current period and the elimination of Wholesale service fees charged for fulfillment of inventory for virtual store sales, net of (ii) the elimination of intercompany profit for Wholesale inventory purchases by Retail that remain in ending inventory at the end of the current period.

Our international operations are not material, and the majority of the revenue and total assets are within the United States.

Fair Values of Financial Instruments

In accordance with ASC No. 820, Fair Value Measurements and Disclosures, the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1—Observable inputs that reflect quoted prices in active markets

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3—Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions

Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable. The fair values of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1. The fair value of short-term and long-term debt approximates its carrying value.

Net Earnings (Loss) Per Share

Earnings Per ShareBasic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of unvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

We recognize compensation expense for restricted stock awards and performance share awards ratably over the requisite service period of the award, which is generally three years. We recognize compensation expense for these awards based on the number of awards expected to vest, which includes an estimated average forfeiture rate. We calculate the fair value of these awards based on the closing stock price on the date the award was granted. For those awards with market conditions, we have determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably over the requisite service period regardless of whether the market condition is satisfied. For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte Carlo simulation model. The fair value models for stock options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of the options.

Income Tax, Policy [Policy Text Block]

Income Taxes

The provision for income taxes includes federal, state and local income taxes currently payable and those deferred because of temporary differences between the financial statement and tax basis of assets and liabilities. The deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. We regularly review deferred tax assets for recoverability and establish a valuation allowance, if determined to be necessary.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy

Restricted Cash

As of October 29, 2022 and October 30, 2021, we had restricted cash of $15,590 and $12,534, respectively, comprised of $14,686 and $11,637, respectively, in prepaid and other current assets in the condensed consolidated balance sheet related to segregated funds for commission due to FLC for logo merchandise sales as per the FLC Partnership's merchandising agreement, and $904 and $897, respectively, in other noncurrent assets in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans.

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Compensation Related Costs, Share Based Payments (Policies)	6 Months Ended
	Oct. 29, 2022
Share-Based Payment Arrangement [Abstract]
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]	We recognize compensation expense for restricted stock awards and performance share awards ratably over the requisite service period of the award, which is generally three years. We recognize compensation expense for these awards based on the number of awards expected to vest, which includes an estimated average forfeiture rate. We calculate the fair value of these awards based on the closing stock price on the date the award was granted. For those awards with market conditions, we have determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably over the requisite service period regardless of whether the market condition is satisfied. For stock options granted with an "at market" exercise price, we determined the grant fair value using the Black-Scholes model and for stock options granted with "a premium" exercise price, we determined the grant date fair value using the Monte Carlo simulation model. The fair value models for stock options use assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected term of the options.

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Revenue (Tables)

6 Months Ended

Oct. 29, 2022

Disaggregation of Revenue [Line Items]

Disaggregation of Revenue [Table Text Block]

Disaggregation of Revenue

The following table disaggregates the revenue associated with our major product and service offerings:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Retail
Course Materials Product Sales	$	419,879	$	433,734	$	547,476	$	555,954
General Merchandise Product Sales (a)	122,648		106,200		211,472		171,623
Service and Other Revenue (b)	14,749		19,370		23,923		29,172
Retail Product and Other Sales sub-total	557,276		559,304		782,871		756,749
Course Materials Rental Income	41,334		49,648		52,246		62,672
Retail Total Sales	$	598,610	$	608,952	$	835,117	$	819,421
Wholesale Sales	$	21,120	$	21,669	$	58,203	$	66,153
DSS Sales (c)	$	8,465	$	8,279	$	17,649	$	16,582
Eliminations (d)	$	(11,097)	$	(11,923)	$	(30,013)	$	(34,385)
Total Sales	$	617,098	$	626,977	$	880,956	$	867,771

(a)Effective in April 2021, as contemplated by the FLC Partnership's merchandising agreement and e-commerce agreement, we began to transition the fulfillment of logo and emblematic general merchandise sales to FLC and Fanatics. The transition to FLC for campus stores was effective in April 2021, and the e-commerce websites transitioned to Fanatics throughout Fiscal 2022. As the logo and emblematic general merchandise sales are fulfilled by FLC and Fanatics, we recognize commission revenue earned for these sales on a net basis in our condensed consolidated financial statements, as compared to the recognition of logo and emblematic sales on a gross basis in the periods prior to the transition.

(b)Service and other revenue primarily relates to brand partnerships and other service revenues.

(c)DSS sales primarily relate to direct-to-student subscription-based revenue.

(d)The sales eliminations represent the elimination of Wholesale sales and fulfillment service fees to Retail and the elimination of Retail commissions earned from Wholesale.

Contract with Customer, Asset and Liability [Table Text Block]

The following table presents changes in deferred revenue associated with our contract liabilities:

	26 weeks ended
	October 29, 2022		October 30, 2021
Deferred revenue at the beginning of period	$	19,722	$	18,139
Additions to deferred revenue during the period	114,975		82,515
Reductions to deferred revenue for revenue recognized during the period	(83,651)		(66,364)
Deferred revenue balance at the end of period:	$	51,046	$	34,290
Balance Sheet classification:
Accrued liabilities	$	46,610	$	29,820
Other long-term liabilities	4,436		4,470
Deferred revenue balance at the end of period:	$	51,046	$	34,290

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Segment Reporting Segment Reporting (Tables)

6 Months Ended

Oct. 29, 2022

Segment Reporting Information [Line Items]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

Summarized financial information for our reportable segments is reported below:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Sales:
Retail	$	598,610	$	608,952	$	835,117	$	819,421
Wholesale	21,120		21,669		58,203		66,153
DSS	8,465		8,279		17,649		16,582
Elimination	(11,097)		(11,923)		(30,013)		(34,385)
Total Sales	$	617,098	$	626,977	$	880,956	$	867,771
Gross Profit
Retail (a)	$	129,502	$	128,825	$	183,495	$	176,968
Wholesale	5,455		5,620		12,354		16,025
DSS	6,694		6,906		14,177		13,936
Elimination	3,184		4,208		(1,703)		(1,341)
Total Gross Profit	$	144,835	$	145,559	$	208,323	$	205,588
Selling and Administrative Expenses
Retail	$	90,086	$	89,486	$	169,090	$	157,851
Wholesale	3,867		4,387		7,998		8,378
DSS	8,132		7,305		16,277		13,752
Corporate Services	5,075		6,809		12,289		14,253
Elimination	(74)		(85)		(82)		(97)
Total Selling and Administrative Expenses	$	107,086	$	107,902	$	205,572	$	194,137
Depreciation and Amortization
Retail	$	8,869	$	8,669	$	18,398	$	18,076
Wholesale	1,370		1,364		2,719		2,664
DSS	503		1,902		2,140		3,801
Corporate Services	17		17		35		35
Total Depreciation and Amortization	$	10,759	$	11,952	$	23,292	$	24,576
Operating Income (Loss)
Retail	$	30,547	$	29,595	$	(3,993)	$	(1,042)
Wholesale	218		(131)		1,637		4,983
DSS	(1,941)		(2,301)		(4,240)		(3,617)
Corporate Services	(5,352)		(6,867)		(12,959)		(15,226)
Elimination	3,258		4,293		(1,621)		(1,244)
Total Operating Income (Loss)	$	26,730	$	24,589	$	(21,176)	$	(16,146)

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

	13 weeks ended				26 weeks ended
Reconciliation of segment Operating Income (Loss) to consolidated Income (Loss) Before Income Taxes:	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Total Operating Income (Loss)	$	26,730	$	24,589	$	(21,176)	$	(16,146)
Interest Expense, net	4,886		2,264		8,754		4,758
Income (Loss) Before Income Taxes	$	21,844	$	22,325	$	(29,930)	$	(20,904)

(a)    For the 26 weeks ended October 30, 2021, gross margin includes a merchandise inventory loss of $434 in the Retail Segment. See Note 2. Summary of Significant Accounting Policies - Merchandise Inventories.

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Net Earnings (Loss) Per Share (Tables)

6 Months Ended

Oct. 29, 2022

Reconciliation of Basic and Diluted Loss Per Share

The following is a reconciliation of the basic and diluted earnings per share calculation:

	13 weeks ended				26 weeks ended
(shares in thousands)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Numerator for basic earnings per share:
Net income (loss) available to common shareholders	$	22,144	$	22,528	$	(30,563)	$	(21,100)
Less allocation of earnings to participating securities	(11)		(64)		—		—
Net income (loss) available to common shareholders	$	22,133	$	22,464	$	(30,563)	$	(21,100)
Numerator for diluted earnings per share:
Net income (loss) available to common shareholders	$	22,133	$	22,464	$	(30,563)	$	(21,100)
Allocation of earnings to participating securities	11		64		—		—
Less diluted allocation of earnings to participating securities	(11)		(61)		—		—
Net income (loss) available to common shareholders	$	22,133	$	22,467	$	(30,563)	$	(21,100)
Denominator for basic earnings per share:
Basic weighted average shares of Common Stock	52,438		51,666		52,305		51,570
Denominator for diluted earnings per share:
Basic weighted average shares of Common Stock	52,438		51,666		52,305		51,570
Average dilutive restricted stock units	141		611		—		—
Average dilutive performance shares	—		—		—		—
Average dilutive restricted shares	10		126		—		—
Average dilutive performance share units	—		255		—		—
Average dilutive stock options	606		1,910		—		—
Diluted weighted average shares of Common Stock	53,195		54,568		52,305		51,570
Earnings (Loss) per share of Common Stock:
Basic	$	0.42	$	0.43	$	(0.58)	$	(0.41)
Diluted	$	0.42	$	0.41	$	(0.58)	$	(0.41)

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Leases (Tables)

6 Months Ended

Oct. 29, 2022

Leases [Abstract]

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of October 29, 2022:

	As of
	October 29, 2022
Remainder of Fiscal 2023	$	102,628
Fiscal 2024	58,137
Fiscal 2025	50,811
Fiscal 2026	38,301
Fiscal 2027	30,161
Thereafter	83,321
Total lease payments	363,359
Less: imputed interest	(41,799)
Operating lease liabilities at period end	$	321,560

Supplemental Operating Lease Disclosures [Table Text Block]

The following summarizes additional information related to our operating leases:

	As of
	October 29, 2022			October 30, 2021
Weighted average remaining lease term (in years)	5.3 years			5.3 years
Weighted average discount rate	4.4		%	4.6		%
Supplemental cash flow information:
Cash payments for lease liabilities within operating activities	$	75,876		$	64,103
Right-of-use assets obtained in exchange for lease liabilities from initial recognition	$	86,045		$	77,811

Lease, Cost

The following table summarizes lease expense:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Variable lease expense	$	25,281	$	30,738	$	40,465	$	42,440
Operating lease expense	52,998		48,990		75,860		65,363
Net lease expense	$	78,279	$	79,728	$	116,325	$	107,803

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Stock-Based Compensation Stock-Based Compensation (Tables)

6 Months Ended

Oct. 29, 2022

Share-Based Payment Arrangement [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

We recognized compensation expense for long-term incentive plan awards in selling and administrative expenses as follows:

	13 weeks ended				26 weeks ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Stock-based awards
Restricted stock expense	$	64	$	119	$	158	$	207
Restricted stock units expense	990		931		2,013		1,661
Performance share units expense	—		29		10		63
Stock option expense	665		399		1,329		669
Sub-total stock-based awards:	$	1,719	$	1,478	$	3,510	$	2,600
Cash settled awards
Phantom share units expense	$	66	$	2,452	$	268	$	4,924
Total compensation expense for long-term incentive awards	$	1,785	$	3,930	$	3,778	$	7,524

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Summary of Significant Accounting Policies Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jul. 31, 2021	May 01, 2021	Oct. 29, 2022	Apr. 30, 2022	Oct. 30, 2021
Operating Lease, Right-of-Use Asset			$ 291,704	$ 286,584	$ 252,650
Goodwill			4,700	4,700	4,700
Property, Plant and Equipment, Net			96,096	94,072	91,875
Intangible Assets, Net (Excluding Goodwill)			121,487	129,624	141,847
Restricted Cash			15,590		12,534
Restricted Cash, Current			14,686		11,637
Restricted Cash, Noncurrent			904		897
Other noncurrent assets			20,980	$ 23,971	$ 26,010
Inventories
Proceeds from Sale of Other Assets	$ 1,906	$ 41,773
Gain (Loss) on Disposition of Other Assets	$ 434	$ 10,262
DSS [Member]
Goodwill			$ 4,700

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Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 29, 2022	Oct. 30, 2021	Oct. 29, 2022	Oct. 30, 2021	Apr. 30, 2022	May 01, 2021
Disaggregation of Revenue [Line Items]
Revenues	$ 617,098	$ 626,977	$ 880,956	$ 867,771
Product sales and other	575,764	577,329	828,710	805,099
Deferred Revenue	51,046	34,290	51,046	34,290	$ 19,722	$ 18,139
Deferred Revenue, Current	46,610	29,820	46,610	29,820
Deferred Revenue, Noncurrent	4,436	4,470	4,436	4,470
Deferred Revenue, Additions			114,975	82,515
Contract with Customer, Liability, Revenue Recognized			(83,651)	(66,364)
Deferred Revenue, Additions			114,975	82,515
Contract with Customer, Liability, Revenue Recognized			(83,651)	(66,364)
Intersegment Eliminations [Member]
Disaggregation of Revenue [Line Items]
Revenues	(11,097)	(11,923)	(30,013)	(34,385)
Corporate, Non-Segment [Member]
Disaggregation of Revenue [Line Items]
Revenues			(30,013)	(34,385)
Retail Segment [Member]
Disaggregation of Revenue [Line Items]
Revenues	598,610	608,952	835,117	819,421
Retail Segment [Member] | Transferred at Point in Time
Disaggregation of Revenue [Line Items]
Product sales and other	557,276	559,304	782,871	756,749
Retail Segment [Member] | Transferred over Time
Disaggregation of Revenue [Line Items]
Rental income	41,334	49,648	52,246	62,672
Retail Segment [Member] | Service and Other [Member]
Disaggregation of Revenue [Line Items]
Revenues	14,749	19,370	23,923	29,172
Retail Segment [Member] | Course Materials Product
Disaggregation of Revenue [Line Items]
Revenues	419,879	433,734
Retail Segment [Member] | General Merchandise Product
Disaggregation of Revenue [Line Items]
Revenues	122,648	106,200	211,472	171,623
Retail Segment [Member] | Retail Product [Member]
Disaggregation of Revenue [Line Items]
Revenues			547,476	555,954
Wholesale [Member]
Disaggregation of Revenue [Line Items]
Revenues	21,120	21,669	58,203	66,153
DSS [Member]
Disaggregation of Revenue [Line Items]
Revenues	$ 8,465	$ 8,279	$ 17,649	$ 16,582

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Segment Reporting Segment Reporting (Details) $ in Thousands	3 Months Ended			6 Months Ended		12 Months Ended
	Oct. 29, 2022 USD ($) Store	Oct. 30, 2021 USD ($)	Jul. 31, 2021 USD ($)	Oct. 29, 2022 USD ($) Store segment	Oct. 30, 2021 USD ($)	May 01, 2021 USD ($)
Segment Reporting Information [Line Items]
Number of Reportable Segments | segment				3
Number of Stores | Store	1,399			1,399
Revenues	$ 617,098	$ 626,977		$ 880,956	$ 867,771
Gross Profit	144,835	145,559		208,323	205,588
Depreciation and amortization expense	10,759	11,952		23,292	24,576
Operating Income (Loss)	26,730	24,589		(21,176)	(16,146)
Interest expense, net	4,886	2,264		8,754	4,758
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	21,844	22,325		(29,930)	(20,904)
Selling and administrative expenses	107,086	107,902		205,572	194,137
Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Revenues	(11,097)	(11,923)		(30,013)	(34,385)
Gross Profit	3,184	4,208		(1,703)	(1,341)
Operating Income (Loss)	3,258	4,293		(1,621)	(1,244)
Selling and administrative expenses	(74)	(85)		(82)	(97)
Corporate, Non-Segment [Member]
Segment Reporting Information [Line Items]
Depreciation and amortization expense	17	17
Operating Income (Loss)	(5,352)	(6,867)
Selling and administrative expenses	5,075	6,809		12,289	14,253
Inventories
Segment Reporting Information [Line Items]
Gain (Loss) on Disposition of Other Assets			$ 434			$ 10,262
Retail Segment [Member]
Segment Reporting Information [Line Items]
Revenues	598,610	608,952		835,117	819,421
Gross Profit	129,502	128,825		183,495	176,968
Depreciation and amortization expense	8,869	8,669		18,398	18,076
Operating Income (Loss)	30,547	29,595		(3,993)	(1,042)
Selling and administrative expenses	$ 90,086	89,486		$ 169,090	157,851
Wholesale [Member]
Segment Reporting Information [Line Items]
Number of Wholesale Customers | Store				3,100
Number of System Customers | Store	350			350
Revenues	$ 21,120	21,669		$ 58,203	66,153
Gross Profit	5,455	5,620		12,354	16,025
Depreciation and amortization expense	1,370	1,364		2,719	2,664
Operating Income (Loss)	218	(131)		1,637	4,983
Selling and administrative expenses	3,867	4,387		7,998	8,378
DSS [Member]
Segment Reporting Information [Line Items]
Revenues	8,465	8,279		17,649	16,582
Gross Profit	6,694	6,906		14,177	13,936
Depreciation and amortization expense	503	1,902		2,140	3,801
Operating Income (Loss)	(1,941)	(2,301)		(4,240)	(3,617)
Selling and administrative expenses	$ 8,132	$ 7,305		16,277	13,752
Corporate, Non-Segment [Member]
Segment Reporting Information [Line Items]
Revenues				(30,013)	(34,385)
Depreciation and amortization expense				35	35
Operating Income (Loss)				$ (12,959)	$ (15,226)
Physical Stores [Member]
Segment Reporting Information [Line Items]
Number of Stores | Store	793			793
Virtual Stores [Member]
Segment Reporting Information [Line Items]
Number of Stores | Store	606			606

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Net Earnings (Loss) Per Share - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Oct. 29, 2022	Jul. 30, 2022	Oct. 30, 2021	Jul. 31, 2021	Oct. 29, 2022	Oct. 30, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares Paid for Tax Withholding for Share Based Compensation					344,587
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3,153,516		523,447		4,898,303	3,771,594
Earnings Per Share, Basic	$ 0.42		$ 0.43		$ (0.58)	$ (0.41)
Earnings Per Share, Diluted	$ 0.42		$ 0.41		$ (0.58)	$ (0.41)
Net Income (Loss) Available to Common Stockholders, Basic	$ 22,133		$ 22,464		$ (30,563)	$ (21,100)
Undistributed Earnings, Basic	11		64		0	0
Undistributed Earnings (Loss) Allocated to Participating Securities, Diluted	$ (11)		$ (61)		$ 0	$ 0
Basic	52,438,000		51,666,000		52,305,000	51,570,000
Average dilutive restricted stock units	141,000		611,000		0	0
Average dilutive performance shares	0		0		0	0
Average dilutive restricted shares	10,000		126,000		0	0
Average Dilutive Performance Share Units	0		255,000		0	0
Average dilutive stock options	606,000		1,910,000		0	0
Weighted Average Number of Shares Outstanding, Diluted	53,195,000		54,568,000		52,305,000	51,570,000
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 26,669				$ 26,669
Net Income (Loss) Attributable to Parent	22,144	$ (52,707)	$ 22,528	$ (43,628)	(30,563)	$ (21,100)
Undistributed Earnings (Loss) Available to Common Shareholders, Basic	(11)		(64)		0	0
Net Income (Loss) Attributable to Parent, Diluted	$ 22,133		$ 22,467		$ (30,563)	$ (21,100)

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Fair Values of Financial Instruments Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Oct. 29, 2022	Oct. 30, 2021
Fair Value Disclosures [Abstract]
Other Deferred Compensation Arrangements, Liability, Classified, Noncurrent		$ 1,129
Other Deferred Compensation Arrangements, Liability, Current and Noncurrent		3,474
Other Deferred Compensation Arrangements, Liability, Current		2,345
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Deferred Compensation Arrangements, Liability, Current		2,345
Other Deferred Compensation Arrangements, Liability, Classified, Noncurrent		1,129
Other Deferred Compensation Arrangements, Liability, Current and Noncurrent		$ 3,474
Phantom Share Units (PSUs)
Fair Value Disclosures [Abstract]
Other Deferred Compensation Arrangements, Liability, Classified, Noncurrent	$ 80
Other Deferred Compensation Arrangements, Liability, Current and Noncurrent	1,398
Other Deferred Compensation Arrangements, Liability, Current	1,318
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Deferred Compensation Arrangements, Liability, Current	1,318
Other Deferred Compensation Arrangements, Liability, Classified, Noncurrent	80
Other Deferred Compensation Arrangements, Liability, Current and Noncurrent	$ 1,398

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Debt - Additional Information (Details) - USD ($) $ in Thousands		6 Months Ended
	Mar. 04, 2022	Oct. 29, 2022	Oct. 30, 2021	Jun. 07, 2022	Apr. 30, 2022
Line of Credit Facility [Line Items]
Line Of Credit Potential Increase Amount		$ 100,000
Short-term Debt		0	$ 0		$ 40,000
Letters of Credit Outstanding, Amount		4,759	4,759
Debt, Long-term and Short-term, Combined Amount		222
Long-Term Debt		252,000	183,300		$ 185,700
Proceeds from Issuance of Secured Debt		348,200	259,720
Proceeds from (Repayments of) Secured Debt		$ 321,900	254,020
Term Loan
Line of Credit Facility [Line Items]
Long-term Debt, Description		The Term Loans accrue interest at a rate equal to 11.25%, payable quarterly, and mature on June 7, 2024. We have the right, through December 31, 2022, to pay all or a portion of the interest on the Term Loans in kind. To date, all interest on the term loan has been paid in cash. The Term Loans do not amortize prior to maturity. Solely to the extent that any Term Loans remain outstanding on June 7, 2023, we must pay a fee of 1.5% of the outstanding principal amount of the Term Loans on such date. The Term Loans are required to be repaid (i) after repayment of the FILO Facility under the Credit Agreement, with up to 100% of the proceeds of the sale of a non-core business line of the Company generating net proceeds in excess of $1,000, other than ordinary course dispositions and (ii) in full in connection with a debt or equity financing transaction generating net proceeds in excess of an amount sufficient to repay the FILO Facility under the Credit Agreement.The Term Loan Credit Agreement does not contain a financial covenant, but otherwise contains representations and warranties, covenants and events of default that are substantially the same as those in the Credit Agreement, including restrictions on the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions. The Term Loan Facility is secured by second-priority liens on all assets securing the obligations under the Credit Agreement, which is all of the assets of the Company and the Guarantors, subject to customary exclusions and limitations set forth in the Term Loan Credit Agreement and the other loan documents executed in connection therewith.The Credit Agreement amendment permitted us to incur the Term Loan Facility and also provides that, upon repayment of the Term Loan Credit Agreement (and, if applicable, any replacement credit facility thereof), we may incur second lien secured debt in an aggregate principal amount not to exceed $75,000.
Long-Term Debt		$ 30,000		$ 30,000
Repayments of Long-Term Debt		0
Proceeds from Issuance of Debt		30,000
Debt Issuance Costs, Net		1,964
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 500,000
New Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit Facility Maturity Term		5 years
Line of Credit Facility, Maximum Borrowing Capacity		$ 400,000
Proceeds from Lines of Credit		318,200
Repayments of Lines of Credit		321,900
Debt, Long-term and Short-term, Combined Amount			$ 183,300
Long-term Debt, Description	On March 4, 2022, we were granted a waiver to the condition to the draw scheduled for April 2022 under the FILO Facility, that Consolidated EBITDA (as defined in the Credit Agreement) minus Restricted Payments (as defined in the Credit Agreement) equal at least $110,000. Under the waiver amendment, the commitment under the FILO Facility of $25,000 was increased to $40,000, with all remaining terms unchanged.
FILO [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 100,000

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Leases Leases (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 29, 2022	Oct. 30, 2021	Oct. 29, 2022	Oct. 30, 2021
Leases [Abstract]
Operating Lease, Weighted Average Remaining Lease Term	5 years 3 months 18 days	5 years 3 months 18 days	5 years 3 months 18 days	5 years 3 months 18 days
Variable Lease, Cost	$ 25,281	$ 30,738	$ 40,465	$ 42,440
Lease, Cost	52,998	48,990	75,860	65,363
Operating Lease, Expense	78,279	$ 79,728	116,325	$ 107,803
Lessee, Operating Lease, Liability, Payments, Due Year Two	58,137		58,137
Lessee, Operating Lease, Liability, Payments, Due Year Three	50,811		50,811
Lessee, Operating Lease, Liability, Payments, Due Year Four	38,301		38,301
Lessee, Operating Lease, Liability, Payments, Due Year Five	30,161		30,161
Lessee, Operating Lease, Liability, Payments, Due after Year Five	83,321		83,321
Lessee, Operating Lease, Liability, Payments, Due	363,359		363,359
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	41,799		41,799
Operating Lease, Liability	$ 321,560		$ 321,560
Operating Lease, Weighted Average Discount Rate, Percent	4.40%	4.60%	4.40%	4.60%
Operating Lease, Payments			$ 75,876	$ 64,103
ROU Asst Obtained in Exchange for Lease Liabilites			86,045	$ 77,811
Lessee, Operating Lease, Liability, to be Paid, Year One	$ 102,628		$ 102,628

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Supplementary Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 29, 2022	Oct. 30, 2021	Oct. 29, 2022	Oct. 30, 2021
Restructuring and other charges	$ 260	$ 1,116	$ 635	$ 3,021
Employee Severance [Member]
Restructuring and other charges		418		1,250
Other Restructuring [Member]
Restructuring and other charges		698		1,771
Employee Severance [Member]
Accrued Salaries		$ 754		$ 754

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Stock-Based Compensation Stock-Based Compensation (Details) - USD ($)	3 Months Ended		6 Months Ended
	Oct. 29, 2022	Oct. 30, 2021	Oct. 29, 2022	Oct. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation			$ 3,510,000	$ 2,600,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount	$ 13,077,000		$ 13,077,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition			2 years 3 months 18 days
Restricted Stock [Member] | us-gaap_ShareBasedPaymentArrangementBODMember
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			11,804
Restricted Stock Units (RSUs) [Member] | Share-based Payment Arrangement, Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			878,247
Restricted Stock Units (RSUs) [Member] | us-gaap_ShareBasedPaymentArrangementBODMember
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			82,628
Equity Option | OptionsAtMarket [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option Indexed to Issuer's Equity, Strike Price			$ 2.36
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Method Used			Black-Scholes
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate			3.28%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term			6 years 3 months 18 days
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate			74.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate			0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	$ 1.61		$ 1.61
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			322,495
Equity Option | OptionsAtPremium [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option Indexed to Issuer's Equity, Strike Price			$ 4.86
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Method Used			Monte Carlo
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate			3.28%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term			10 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate			74.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate			0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	$ 1.28		$ 1.28
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			348,723
Selling, General and Administrative Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation	$ 1,719,000	$ 1,478,000	$ 3,510,000	2,600,000
us-gaap_LongTermIncentivePlanCompensation [Line Items]	1,785,000	3,930,000	3,778,000	7,524,000
Selling, General and Administrative Expenses [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation	64,000	119,000	158,000	207,000
Selling, General and Administrative Expenses [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation	990,000	931,000	2,013,000	1,661,000
Selling, General and Administrative Expenses [Member] | Performance Share Units (PSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation	0	29,000	10,000	63,000
Selling, General and Administrative Expenses [Member] | Equity Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation	665,000	399,000	1,329,000	669,000
Selling, General and Administrative Expenses [Member] | Phantom Share Units (PSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Deferred Compensation Arrangement with Individual, Compensation Expense	$ 66,000	$ 2,452,000	$ 268,000	$ 4,924,000

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Income Taxes Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Oct. 29, 2022	Oct. 30, 2021	Oct. 29, 2022	Oct. 30, 2021
Income Tax Disclosure [Abstract]
Income Tax Expense (Benefit)	$ (300)	$ (203)	$ 633	$ 196
Effective Income Tax Rate Reconciliation, Percent	(1.40%)	(0.90%)	(2.10%)	(0.90%)
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	$ 21,844	$ 22,325	$ (29,930)	$ (20,904)

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Subsequent Events (Details)	3 Months Ended
	Oct. 29, 2022
Subsequent Events [Abstract]
Subsequent Event, Description	On December 2, 2022, the Board of Directors approved a company-wide initiative to drive efficiencies, streamline operations, simplify the organizational structure and further reduce non-essential costs. These actions are expected to be substantially implemented within thirty days. The Company expects to incur restructuring charges, primarily related to severance, of approximately $5,000 to $6,000 in the third quarter of fiscal 2023 and expects to save $10,000 to $15,000 in fiscal year 2023. These initiatives are expected to provide annualized savings of $30,000 to $35,000 once fully implemented. The restructuring charges are excluded from non-GAAP adjusted EBITDA and from the annualized and fiscal year 2023 savings.